Applying for a loan is stressful enough as it is, but what happens if you’re denied? A key reason may be your credit score. Sadly, for many Americans, the first time they actually learn their credit score is when they are denied a loan.
Obviously, for those looking towards a secure financial future, the first step in rectifying the situation is to improve their credit score. Improving a credit score is no easy task. Building a good score can take years, and it can all be destroyed in an instant by having a single payment on a loan or credit card go more than thirty days past due.
Fortunately, working with the best credit repair agencies in El Paso, Texas can help you get your credit score back on track.
How Are Credit Scores Determined?
Credit scores are determined using proprietary formulas developed by three different credit reporting bureaus located in the US. These companies are Experian, Transunion, and Equifax.
Each and every American, whether they know it or not, most likely has a credit score on file with each of these credit reporting agencies. Even if a person has never had a credit card or a loan, they may have a credit score as a result of utility bills that have gone unpaid or a payment plan agreement for that has gone to collections.
Every thirty days, each credit reporting agency updates credit scores according to the information they’ve received from the financial institutions and collections agencies that month. Some banks report each and every month to the bureaus, while other institutions report every ninety days.
While the exact formulas used are proprietary to each credit reporting agency, the following things may affect your score:
Timely Payments
Obviously, making payments on time is the largest overall factor driving credit scores.
Credit Mix
Does a person only have credit cards, or are they also currently paying for a home and an auto loan? How and where credit is allocated can be a determining factor in your overall score.
Credit Usage Ratios
Is a person maxing out their credit cards, or are they only using a small portion? Those who max out their credit cards are seen as riskier than those who only use a portion of the credit available to them and make more money than is needed to pay their debts.
The credit score mortgage lenders use is also affected by accounts that have gone to collections. Because of this, it’s important to verify you have no inaccurate information on your credit report. Minor errors—an incorrect balance on an account that you paid off, or an account that doesn’t belong to being wrongly connected to your credit report—are easiest to remedy with professional help.
Working With a Reputable Credit Repair Company
The goal of the credit repair process is to remove inaccuracies from your credit report. Typically this is done by communicating with the banks and credit reporting bureaus.
Documentation is obtained from the banks to prove that the information being reported to the bureaus is incorrect, and this is then passed along to the credit reporting bureaus. Typically, this involves several rounds of certified mail and a short eternity spent on hold waiting for responses from customer service.
Once the inaccuracies are removed, credit repair companies such as The Phenix Group can further assist you by providing counseling on ways to improve your overall credit profile and score and help explain things such as whether canceling a credit card hurts your credit.
By improving your score you can easily save yourself tens of thousands of dollars in interest payments over the lifetime of loans you obtain in the future.
To Summarize
Credit scores are a somewhat mysterious but important part of life. Because they update every thirty or ninety days, it’s best to keep track of all your debts and payments to keep your score from slipping. If you need assistance with managing your credit score, contact The Phenix Group today!