What happens when your credit score goes down? What is a credit score?

Question

How can it go up? Will it effect which job I can get, the college I can go to, the house I can buy? What else can it effect, and what is it really? How important is a credit score in your life? What happens you when you fail to pay your debt and your credit score goes down?

Answer 1

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CREDIT AND CREDIT SCORES
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Any lender, creditor, insurer, Banker, landlord or even an employer can have access to your credit report. They can and in most cases will review and analyze your credit report before approving you for loans, credits, job or even an apartment lease. Most people may not know, but it also affects rates for your auto and other insurance, and the specific rates you will get when offered a loan. The lower your score, the higher risk you are in paying back money lent to you.

The purpose is to gauge the credit risk a creditor/leaser has in you before approving you for a loan or lease. In the light of this, deferred payments or delayed payments are obvious setbacks in your credit report. Get a free credit report (1 from each bureau per year) online at www.annual creditreports.com or call 877-322-8228 for further details.

Your credit report consists of:

1. Personal information: name, social security number, current and previous addresses, birth date and details of current and previous employers of a person.

2. Credit History: documents information about accounts with banks, retailers, credit card issuers and/or other lenders, detailing the name of the creditor, the account number, the date of opening of the account, the kind of credit (installment or revolving), total loan amount, monthly payments, names of single or joint holders, existing debt amount, status of the account, and most importantly how well the loan has been or is being paid off.

3. Public information: Record of bankruptcies, tax liens, and monetary judgments are recorded under this head.

4. Inquiries: Names of those who requested and obtained copies of credit report.


0 FICO SCORE
The credit scoring software devised by Fair Isaac (which is the widely accepted model for credit scoring), the founder of FICO, looks at five areas of a credit report with differing emphasis, for calculating a credit score:

1. Payment history alone accounts for 35% of the credit rating and places greatest emphasis on recent account activity. It shows the consistency in which you have been making bill payments. Any late payments, collection agency records or records of bankruptcy result in severe loss of points.

2. Length of Credit History accounts for 15% of the credit score. Older credit accounts with the same issuer score more points.

3. New Credit contributes 10% and depends upon the number of new credit applications you have filled out. The only time when applying for new credit hurts your scores, is when there are payment ptroblems with the existing credit cards.

4. Types of credits used make for 10% of the credit score. The best scores are the ones with a mix of revolving credit (such as credit cards), and installment credit (such as mortgages and car loans). It appears that consumers with a richer variety of experiences are better credit risks statistically as it shows they know to handle their money.

5. Debt contributes 30% to a credit score. It is calculated as a sum total of outstanding debts on credit cards, car loans, mortgages, home equity lines or such other debts.


0 MAINTAINING GOOD CREDIT

--Make Timely Bill Payments: Payment history contributing 35% of the total credit score. It is the single most important factor in determining your credit ratings. If you have had a past record of skipped payments in your credit report, dont sweat! You still have the power to salvage it from murky waters. Since lenders lay premium on recent history than what happened years ago getting into the habit of making on-time payments is a powerful tool to start building a good credit history.

The best way to avoid late payments is to automate the payment processes from one of your existing checking accounts. Your mortgage lender, utility and phone service providers would be glad to take their payments directly from your checking account every month. Online bill-payment systems take the load off your monthly check-writing chore, and many provide reminder services so you don't forget a bill. The latest versions of Quicken and Money have good reminder features.

--Pay down debts: Higher the credit card debts worse it is for your credit score. Make sure to pay off the outstanding balances on your credit card every month. Lenders typically look for lots of room between the amount of debt reported on your credit card and your total credit limit. Repaying debts on a regular basis serves to bridge this gap.

Avoid using up all the credit available on your credit card. Credit cards that are maxed out do not give a good impression of your financial soundness. Try to spend only 30% of your credit limit. This will contribute to lower debts and therefore a significantly lower debt to income ratio, which is so important for lenders in judging a persons creditworthiness.

--Don't close old, paid-off accounts: Here's a word from Craig Watts, executive at Fair Isaac & Co., who observes that: "Closing accounts can never help your score, and often it can hurt. "Lenders have been found to look for consumers with long credit histories that have been managed well. It is advisable to not close old credit card or loan accounts that have been operated with dexterity over the years. This can yield you a credit history which will put you in favorable light. Creditors consider such borrowers as safer and more likely towards making credit repayments. Keeping old accounts can only enhance your credit report.

--Minimize credit card applications: On an average, a consumer has a total of eleven credit obligations, of which seven are credit cards and four are loans. Each time you apply for credit, a lender requests to view your report. This inquiry is noted and can reduce your overall score. Don't apply for unnecessary credit. If you're looking for a loan it is advisable to abstain from making new credit applications for credit for 18 months prior to your purchase.

--Keep continuous tabs on your credit report: Maintaining the integrity of credit reports is vital in preventing inaccuracy in your credit score. Credit reports are independently gathered and preserved by three major credit bureaus namely Equifax, Experian and Trans Union. You must always keep an eye for errors in your credit report. Check credit reports once every four months by requesting a free copy from each of the aforementioned credit bureaus. That way any inconsistency such as a miss-spelt name or inclusion of disputed accounts within your report caused either by the bureau or identity theft can be cleansed before it starts affecting your credit scores.

--Avoid Bankruptcy: Bankruptcy can completely blow your credit score and any record of it in your credit report is worse than records of delinquencies, loans or collections. It can knock off 200 points or more off someone with an otherwise good credit. With a bankruptcy on file, credit becomes scarce and far more expensive. Get good objective advice before filing for bankruptcy. Avoid it if at all possible.

Answer 2

Your credit score is used by Financial Institutions to determine how creditworthy you are and what rate to charge you. The higher the score the beter the rates and other incentives. A credit score is affected by your repayment history, length of time at a job, whether you own or rent to name a few. It is not used for college or a job. It will determine what kind of mortgage you can qualify for and what kind of credit you are entitled to. Your credit score is very important to you so I urge you to make all payments on time and try to pay off your credit cards to ensure you are not just paying the min..
Your credit score will go down if any of the above factors change or if you start living on your credit cards or lines of credit.
With a high credit score, you will be offered credit on an ongoing basis.
Just remember, pay your bills, live within your means and do a credit check once a year to ensure someone else has not accessed your info. and is using your credit. You can go to the firm that does the credit checks to pay a small fee in order to gather this info.. Equifax is a well known firm that does this for an example.

Answer 3

Your credit score can go down from not paying on any outstanding loans, or any unpaid services that were rendered. Your credit score gives lenders an idea of how much money to lend you and if you are able to even get a loan. Every month that you make payments on your car, home etc. that is reported to the major credit bureaus, that is where your credit score comes from. If you want your credit score to go up, then correct any past due delinquencies and check your credit bureau to make sure everything is up to date. There are also companies out there that can for a fee help fix and correct your credit score, thus enabling you to get a better rate and more money for you to borrow.

Answer 4

Usually it won't affect your chances for a job or for college. The people concerned with your credit score, are people who can give you credit (credit cards, loans, financing for big purchases.) Those people are called creditors. A low credit score tells creditors that you might not be trustworthy enough to repay your debt. When you make your payments on time, your score will go up. Some people help their score by getting a credit card, using it a little bit every month and paying it off in full every time. Best of luck!

Answer 5

A credit score is a numerical value designed to reflect your creditworthiness. A high number is obviously good, while a low one is bad. The three major credit reporting business all report credit scores (Experian, Transfax, and I can't rememer the third one), but the one that counts for getting a mortgage is your FICO credit score.

It can go up if your credit cards are paid on time and well within the limits, or if you pay your student loans, car payments, or mortgages on time.

It goes down if you make too many credit card applications in a short amount of time, if you pay your bills late, if your credit cards are maxed out, if a debt goes into collections, etc.

It can affect your employment (some jobs will request a credit check), your ability to rent an apartment or house (most rental agencies do credit checks but they are just looking for past rental issues), your ability to own a house (mortgage companies have strict credit standards), your ability to get a car loan, or your ability to get certain student loans.

If your credit score goes down, it will be difficult do do any of these things. Most jobs, though, don't do credit checks, and most apartments don't care unless you have rental issues on your credit report. You can even get a car with bad credit (but you will pay out the nose in interest).

Hope this helps!

For more information, see www.myfico.com

Answer 6

Your credit score is a mathematical representation of your ability to pay off a loan. The range is roughly 350 to 800. The lower your number the more of a risk you apprear to a creditor. If the number is low creditors will charge you more upfront to make up for that risk or you may have to put a deposit down. Its a big deal trust me so the more you learn now the better off you will be. You need credit to buy anything you cant afford to pay cash for like cars, house, etc. With a lower score you end up paying more than someone with better (higher number) credit.

Answer 7

your credit score is your financial self on a piece of paper. it lists all your major transactions and how reliable you are in paying off debts and such. there are three scores that everyone has. generally, stupid people, assume that their highest score is their credit when it's actually their middle score. all three bureaus use different scoring models in terms of figuring out your score. generally equifax is the most reliable and this one tends to be everyones credit score.
it goes down when you fail to pay on time, have way too many people looking at it, not paying bills at all, etc. you can make it go up through a variety of reasons but usually timeliness of payments is the biggest factor. pay on time and your score will increase. also depends on what kind of tradelines (different types of credit ) you have on your report. ideally one should have about 2-3 credit cards, a mortgage, an auto loan and some utilities on there to balance everything out.
colleges don't really care about yout credit score unless you're trying to get a loan to pay it off, won't affect your entry into college but will affect in how you will pay for it. most jobs don't care about credit either. anything related to the financial field will care to a certain extent. usually people with bad credit are not happy bcuz of this reason. usually it's bcuz of bills piling up, not enough money, etc etc. credit is extremely important in your life since it's how you are able to get most things you'll need in it. the only way to really bypass credit is to have lots and lots of money. with money in hand, people will turn a blind eye to your credit even if its horrible.

Answer 8

Your credit score is a physical representation of your ability and willingness to pay as promised. Many transactions are affected by your credit score these days and most have access to it, that includes your employment and your transactions. When that score goes down you have to work like .........to get it back up again. So pay your bills! Remember big brother is always looking! Peace!

Answer 9

if your credit score goes down it affects your ability to finance anything. pay your bills on time and slowly your score will go up.

Answer 10

For Credit and finance solutions I recommend this website where you can find all the solutions. http://your-finance.us/index.html?src=5YAWds13tGY73fDG1

RE :What happens when your credit score goes down? What is a credit score?
How can it go up? Will it effect which job I can get, the college I can go to, the house I can buy? What else can it effect, and what is it really? How important is a credit score in your life? What happens you when you fail to pay your debt and your credit score goes down?
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Answer 11

Hi, just wanted to mention, I loved this discussion. Very inspiring answers