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Understanding Credit: What Factors Affect Your Score

Credit ScoreDealing with financial problems can be one of the most difficult challenges you’ll ever face. Not only is it overwhelming, it can also create long-term consequences. One of the reasons for this is your credit score.

A single financial misstep or unexpected medical event can stain your credit, and even if you get things back on track, the damage it does can last for years.

What do you need to know about your credit and what affects it?

You Can Have Different Credit Scores at the Same Time

Most people understand credit scores change over time.

Your score can increase or decrease from month to month due to online, late, or missed bill payments, having your credit score pulled, and having things “drop off” your credit as time passes.

But you should also know your credit score varies based on what agency provides the information.

Your credit report can be requested in a single day and if it comes from different credit agencies, the score will be different because three main credit reporting agencies, Experian, Equifax, and Trans Union, have different reporting models.

Furthermore, the institution requesting your credit score will likely have different ways of gathering information and can use any or all of the information provided by the three main reporting agencies. For instance, a mortgage lender will analyze information differently than a credit card company.

The differences in your score probably won’t be significant. If you have great credit, your score will be high no matter how it’s gathered, unless there is incorrect information on one of the reports. Likewise, if your credit is poor.

However, if you have an average rating, it can be tough to predict whether or not you’ll receive approval from a lender because depending on the criteria used, the approval could go either way. What a car loan lender considers good credit, a mortgage lender might consider too much of a risk.

Different Agencies Use Different Scoring Ranges

Though the standard scoring range (FICO) for credit scoring is 350 to 850, different agencies each have their own scoring system. For instance, Experian’s scoring range is from 300 to 900.

Adding to the confusion, different creditors can choose to report to different agencies. One credit agency might have information on all of your debts, while another might have all but one or two debts. Depending on the size of the debt and its status, this can make your credit score vary widely from agency to agency.

Timing

As the saying goes, “time heals all wounds.” Though this isn’t necessarily an absolute truth in life, it is true when it comes to your credit score.

Over time, most of what is on your credit will drop off and new things will appear. Accounts that are open and current will remain on your account, but past due accounts that have been closed and accounts you’ve paid in full or had discharged in bankruptcy, will eventually no longer appear on your credit.

Over time, these changes have a significant impact on your credit score, and depending on when your credit report is pulled there can be a significant difference in your score as time passes.

To learn more about how long certain debts stay on your credit report, check out this information.

One of the most important aspects of achieving success with bankruptcy is understanding your credit score. Not only can it help you determine whether filing for bankruptcy is the right call, it can also help you build a better financial future as you move forward out of bankruptcy.

For more information about how your credit score is determined or to speak to someone about repairing bad credit with bankruptcy, contact the Law Office of Robert M. Geller at 813.254.5696 to schedule a consultation.

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