Get The Facts

Below you will find common questions with accurate answers, or as we like to call them, Credit Facts. Getting facts about credit is tricky, who knows what's right or what's made up. Well, we tried to put together some of the more common credit questions, and we answered them with facts, based on several factors including

Be sure to check out our Credit Info, or Credit Laws, if you still have a question, feel free to contact us.

How is my FICO score configured?

Credit Fact:
The exact formula used for coming up with your score or anyone's score is a well kept, trade secret. There are 5 key factors which makes up a score, given by Fair Isaac Corporation (FICO), as well as the importance of each factor. They are:

FICO credit score ranges between 300 and 850

Here's the breakdown of score ratings:

As stated above, payment history is most important and accounts for 35% of your score. Paying on time every month is key. A couple of missed payments or even a couple of late payments could really damage your score.

Amounts owed or utilization is second most important and accounts for 30% of your score. You want to keep you balance low, especially on your credit cards. The ideal range is under 10%; carrying a high balance, especially over 50% can have a negative impact on your score.

The length of credit history accounts for 15%, and there is no quick fix for this. Just continue to make on time payments, keep you balances low (under 10%), and over time your length of credit history will improve. It is important to note, each time you apply for credit (for example a credit card), your average age of credit history will decrease because of the new credit account. Another example: Lets say you are fairly new at credit, you have 1 credit card that has been open for 12 months. If you were to open a new credit card account, your average age of account(s) will go from 12 months to 6 months.

New credit and types of credit each account for 10% of your score. If you rack up a bunch of new credit in a short period of time this may hurt your score, plus each new account will shorten the average length of your credit history. FICO likes to see a credit mix or "types of credit used," this includes at least 2 open revolving accounts (credit cards), installment loans (auto or personal loan) and a mortgage. Building a mixture of credit accounts (responsibly) over time will have a positive impact on your score.

Will paying off a collection get it off of my credit report?

Credit Fact:
No, simply paying off an account whether negative or positive will not make the account disappear. Collections generally remain on your credit report for 7 years from the date of first delinquency. In some cases, paying off a collection account can actually lower your credit score. There are ways you can increase the chance of getting negative accounts off of your credit report. Find out how you may be able to remove negative accounts.

Paying a collection in full or settle it for less?

Credit Fact:
If you are wondering which one is better, that's tough to say. It depends on what you are trying to do... If you are trying to have the accounts closed for as cheap as possible, settling it would be the way to go. If you have limited funds and can choose to pay 1 collection in full or 2 if they settle for less, settle 2 accounts. If you are looking to find out which one will help your score more, that also depends. Paying or settling a collection will not make it go away, and whether it is paid, settled or unpaid, matters, but only marginally. The fact that you have a collection on your credit report(s) will have a negative impact no matter if it's paid in full, settled, or still left unpaid. Also, timing is everything, if you pay (in full or settled) for example, a collection account 5 years old that hasn't had any activity in the last several years, you could actually hurt your score. New activity on an old, dying off account may have a negative impact on your score. However, in just a couple more years, the account will fall off your credit report, whether paid, settled or unpaid because it will be a 7 year old negative collection account. If you want to pay or settle an account, go for it, but work out a pay for delete deal. This way, once it is paid or settled, it will be removed from all reporting agencies. If you do this, you should work on trying to settle it first and possibly save some money, but be prepared to pay in full if that's what it takes for the collection agency to agree to your pay for delete deal.

After you have bad credit are stuck with it forever?

Credit Fact:
Absolutely not! No matter how bad your credit is, there are ways to start improving it today. Whether it's bankruptcy, judgments, collections, missed or late payments, all of these will not permanently doom you with bad credit forever. In fact, you may be surprised how quickly you can start seeing improvements; Step by Step Guide on improving your credit:

Step 1: Getting Started

Step 2: Credit Report Information and Fixing Errors

Step 3: Collections & Negative accounts

Step 4: Get Approved

Step 5: Keep Tabs on Your Score & Watch it Grow

I have bad credit, how can I get approved for anything?

Credit Fact:
Having bad credit will make it hard to get approved or nearly impossible. You could open a secured credit card or 2, these types of credit cards are as close to guaranteed approvals as one could ask for. Secured cards are just like any other credit card, except you have to deposit money to the issuing bank, which is used as collateral. Secured cards will report to the credit bureaus just like any other card. As you make your payments on time, your credit will improve. Over time you will be able to build good credit history and at that point you should have no problems getting a loan. Best of all, no one would know it's secured except you and the bank. If you are interested in learning more about them, please click secured cards, or for other options in obtaining credit - check out our Credit Guide.

Why are each of my scores from the 3 bureaus different?

Credit Fact:
There could be many reasons for this, and most importantly, you should know each bureau is independent of the others. They are competitors, and receive information based on a source (creditor, lender, collection agency, etc...) reporting an account to them. Some creditors may report to 1 or a couple of reporting agencies but not to all of them. Some creditors report to all the major bureaus. Some negative accounts may be in some reports but not all of them, and the same is true with positive accounts. Creditors are not required to report to all reporting agencies, so you will find some things in one report but not in the other(s). Based on each bureau getting their information for themselves and not from any of the other bureaus, usually each report and score will be different. If you find a positive account not being reported to a certain bureau, you could ask your creditor to report to that bureau. They are not required to do so, but in some cases they may comply. It is also important to note, not all the bureaus use the same scoring model, so if for some chance everything is the same between 2 reports, the scoring model the 2 different bureaus use could be different. For more information about the different scores, scroll down a few more questions...

I've heard inquiries hurt my score, does checking my report hurt my score?

Credit Fact:
Checking your own credit report does not hurt your score. You can check your credit report and/or score as much as you want, it does not hurt your score. The only inquiries that can hurt your score is when you are trying to obtain credit. This is also known as a "hard pull." Hard pulls will remain on your report for 2 years, but only affects your score for 1 year. A single hard pull will have a minimal negative impact on your score, usually between 1-5 points. Multiple hard pulls can have a major negative impact on your score, so avoid several applications and denials. In some cases, having multiple hard pulls in a short period of time will have the same impact as only one hard pull. This is usually due to rate shopping, typically for a mortgage. For more information about the different types of inquiries, check out our Credit Info page.

I have a good score but didn't get approved for a personal loan - why?

Credit Fact:
There could be 1 of several reasons for this or even a combination of several reasons. Without knowing the circumstances, it's fairly tough to say, with any certainty, what the reason is for the denial. On a side note, you are allowed to request a reason from the lender on their decision. Just to throw out a few possibilities, it could be an income issue, requesting a loan that will result in a payment the lender believes you can't afford is one possible reason. Another popular reason is the amount you requested with possibly limited credit. While your credit score is good, it could be good with only two - $500 credit limit credit cards. In this case, you have shown you can handle and afford a potential $1000 of credit, but if you requested a $30,000 unsecured personal loan, that is quite a leap of faith the lender would need to take. Perhaps trying a smaller loan that is secured is the way to go. For example, if you were to apply for a car loan, the car would be used as collateral and put into consideration for approval, along with your good credit score. This would improve your chances for an approval, especially if the loan was not a significant amount of money, perhaps around $10,000. Any unsecured loan involves greater risk than a loan that is secured and backed by something that has a tangible asset, and the lender would have something they could seek out for pay back if for some reason you were to default. Another possibility is the current credit crunch, lenders have simply tightened their belt with lending and the standards for being approved. Some have made the expression: a 750 fico score is the new 650. Which basically means what once was considered good is now considered too risky and what once was considered excellent is now considered acceptable. There are several more possibilities, but your best bet is to find out from the lender why you were denied, and whatever the reason is, work on it to improve your chances down the road.

Different scores and ranges for each?

Credit Fact:

Several lenders may use their own internal scoring system and there's no way of knowing all of them. Lenders use a host of different scoring models to better suit their needs in evaluating an application. There is no wrong or right scoring system. The ones stated above are the common ones...

On a side note, the most common or the score most lenders use is the FICO score. If you want to know your FICO score find out below, or check out our Credit Reports tab.

Fico Scores/Reports

Deleted a negative account - how much will my score go up?

Credit Fact:
There is no set amount per negative account. Plus, there are several things that make up your credit score and each individual has their own unique credit file. The type of account or age of the account will matter greatly on how much of an improvement you should see. Deleting a negative account that's 6 years old will improve your score but only marginally because as it ages it has less and less of a negative impact. However, if the account is only a few months old, you should see a much larger positive impact. Also, what other accounts you have in your credit report(s) will make a difference, for example, if you deleted 1 collection account out of the 10 other collection accounts in your credit report, deleting the one will help but it won't be a huge improvement. If you only have 1 collection account in your credit report(s) and you delete the only negative information in your credit report, you should see a larger increase, but again, it also depends on the age of the account. So if your looking for a number, it's really to complicated to give you one, but if you want our best guess, you could see anywhere from a few points to as much as 50+ points depending on the circumstances.

Authorized User Accounts - Piggybacking?

Credit Fact:
There was a time, not too long ago, where anyone could add anyone as an authorized user. If the person, being added as an authorized user, had bad credit, they would receive a boost in their score for this new, positive account. In 2008 the FICO scoring system caught on to this loop hole when businesses were adding folks with bad credit as an authorized user for a fee. These people weren't given access to the credit card, just simply added to the account. This, in FICO's eyes, as well as many others, felt this was exploitive, even unethical. Needless to say, FICO revised the benefit of authorized users, and they came up with any related spouse, child, or family member would continue to receive a benefit as an authorized user. However, anyone not related, there would be no benefit for adding some one as an authorized user. The nick-name for this is "Piggybacking."

How long does it take to improve my score?

Credit Fact:
There is no short answer for this or no "right" answer either... You could see some improvement in as little as 30 days or less. The next payment on a credit account could improve your score, you could get an error off of your report usually within 30 days. You could open another credit account, which may lower your score or it could improve your score. You should read through the credit repair steps to get a better understanding on how it all works or perhaps the different credit laws we have listed could be beneficial as well. There is no quick way to an excellent credit score. Be patient!

More Credit Information

Accurate credit information is sometimes tough to find. Check out our list of links to various websites for more valid credit information.

If you would like to know what kind of score it takes to get approved from various lenders or for information about collection agencies, check out the following two database links, it's free and easy to add your own experiences too:

Lender or Creditor Info - Collection Agency Info

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