Recently, the RGJ, Reno Gazette Journal published an article details the ins and outs of obtaining a good credit score, the importance of the credit score and fixing a bad credit score.  Please find all of the details in the below article by Jason Hildago:

” If the foundation of modern-day America could be boiled down to three principles, it would be life, liberty and the pursuit of easy access to credit.Credit in particular has been a vital cog in the growth of the U.S. economic engine, fueling the purchase of goods and services by consumers and providing capital for businesses.But it also can be a double-edged sword.Lax lending standards led to an overheated housing market at the turn of the century, triggering one of the worst economic meltdowns in the country’s history.Ironically, the skyrocketing foreclosures, bankruptcies and unemployment that followed have turned around and damaged the credit of many of the same people who enjoyed easy access to borrowing during the boom years.Nevadans are no exception.Credit bustIn addition to seeing the highest rates of unemployment in a quarter century, Nevada was one of four states hit hardest by the housing market collapse along with California, Arizona and Florida. Just this April, the Silver State recorded the nation’s highest foreclosure rate for the 28th straight month, according to foreclosure tracker RealtyTrac.As Nevada’s economy tanked, the credit score of its residents also started to fall. In2008, Nevadans’ average credit score steadily dropped from 630 in the first quarter to 618 in the fourth quarter, a significant decline, according to Steven Katz, director of consumer education for credit reporting bureau TransUnion. The drop coincided with rising delinquency rates across the board for auto, credit card and home loans, with the percentage of late mortgage payments being particularly glaring. According to TransUnion, the 60-day mortgage delinquency rate in Nevada rose from an already high 5.81 percent in the first quarter of last year to a sobering 9.01 percent by the fourth quarter. In comparison, the delinquency rate for mortgages in the state was just 1.35 percent during the first quarter of 2006.All in all, Nevada posted the second-highest mortgage delinquency rate in the nation in the fourth quarter of last year, according to TransUnion. Nevada also had the eighth-highest delinquency rate for auto loans and was No. 1 among all states for its credit card delinquency rate. Given the jump in delinquencies, the drop in Nevada’s credit score is not surprising, Katz said.“No. 1, you had people paying late. No. 2, you had people applying for a lot of credit cards to pay their bill,” Katz said. “And while all that is happening, the balance on all their accounts kept going up and up. All those things will pull your score down.”Giving creditTest scores might hold the most influence in people’s younger years while they attend school. But as adults, no score has a bigger impact on people’s lives than the one that offers an overall snapshot of their ability to borrow.Whether it be the ability to get a house, a car or a student loan, one’s credit score has a huge influence in how easy — or hard — it can be to acquire goods and services.For lenders, it all boils down to risk analysis, said Chad Osorno, Wells Fargo’s regional president for Northern Nevada. Risk profile, which is basically what a credit score signifies, plays a big role in a borrower getting approved or denied for credit, Osorno said. Even if a borrower is approved, loans are also priced according to risk, so someone with a lower score typically gets a higher interest rate depending on the type of loan, Osorno added.Creditworthiness’ far-reaching grasp as a risk-assessment tool isn’t limited to purchasing power. Some landlords are known to pull credit reports of prospective tenants applying for an apartment. Employers also vsn pull credit reports of job applicants as well.“Your credit score is a very important piece of any consumer’s risk profile,” Osorno said. “So, it’s extremely important for them to take it seriously.”Keeping scoreCredit scores can be as varied as the bureaus and companies that compile them. The three major credit bureaus — Equifax, Experian and TransUnion — all have their own credit scoring system.Despite the differences, scores are typically based on the same key components, said Curtis Arnold, founder of Cardratings.com. The most widely touted one, the Fair Isaac Corporation or FICO score, is weighted through five major components, Arnold said:?  Payment history: This tracks whether or not a person pays their credit obligations on time. This is the largest component of one’s score, accounting for about 35 percent of the overall number, Arnold said. Keeping their accounts current is the most important thing people can do to build their credit score. ?  Credit utilization: This runs a close second and accounts for about 30 percent of a person’s credit score, Arnold said. Credit utilization is the ratio between the amount of debt a person carries versus how much available credit the person has left. The less debt people have compared to their available credit, the better. This is also the reason why closing a credit card account that isn’t used often can actually lower one’s credit score. It basically shrinks available credit. Ideally, people’s debt shouldn’t exceed 30 percent of their credit line, not just overall but for each account that they have, Arnold said. ?  Credit history: A reflection of how long a person has had credit, this accounts for about 15 percent of a credit score. Think of it as the opposite of having no credit, which can be just as bad as, well, bad credit. A long payment history, such as having a particular credit card for 10 years, for example, will have a positive impact on a person’s credit score. ?  Types of credit: Also known as your credit mix, this accounts for about 10 percent of a person’s credit score. Ideally, it’s good to have a diverse mix of credit from revolving accounts such as a credit card to traditional debt such as an auto loan or mortgage. ?  New credit: This refers to the number of new credit lines a person has opened, representing about 10 percent of a credit score. Getting or applying for new credit once or twice a year shouldn’t create many red flags, Arnold said. But if a person is applying for credit once or twice a month, then that’s a different story. “It shows that you are hungry for credit, and that’s viewed as a negative,” Arnold said.Bouncing back

Focusing on the five key components of a credit score is not only the best way to build good credit, it’s also the best way to rebuild credit damaged by one of several score killers.

At the top of the list of things that can ruin one’s credit is bankruptcy. Bankruptcy can stay on a credit report for seven years — 10 years if it’s Chapter 7 or Chapter 11 bankruptcy, Katz said. Second most damaging is a problem familiar to many Nevadans: foreclosure. Foreclosure info can stay in a person’s record for seven years.
Bankruptcies and foreclosures are especially damaging because a borrower already has severely damaged credit even before reaching that point by virtue of all their delinquencies. The impact of a short sale, on the other hand, varies depending on the action taken by a lender, with some short sales not even showing up on a credit report, Katz said.Other negative items that can stay on a report for seven years include having an account go to collections, charge-offs for payments deemed uncollectable, lawsuit judgments such as unpaid child support, and tax liens. One thing to remember is that accounts that go to collections can re-date if a new account number is assigned, further extending its time on the record. Charge-offs and tax liens also stay in the credit record even if they are paid off, although unpaid tax liens stay longer at about 15 years.Just because a person pays on time does not immunize a credit score from falling. The crash of the financial markets, for example, has led risk-averse creditors to either close credit card accounts for non-usage or shrink credit limits, both of which negatively impact credit utilization. Such drops are especially crucial nowadays as many lenders are requiring higher scores for the best rates. Two years ago, a score of 680 allowed borrowers to get the best interest rates, Katz said. Now it’s closer to 740 or 750.“Credit scores have been moving targets,” Arnold said. “It’s much tougher to get credit these days.”Know your history

To stay on top of one’s credit history, experts advise regularly checking one’s credit reports. In addition to finding out about unexpected changes and potential errors, checking credit reports is also a good way to discover potential fraudulent activity.

The site AnnualCreditReport.com allows consumers to get a free copy of their credit report once a year from each of the three major credit bureaus. A good strategy is to request a report from one of the three sites every four months. Besides the fact that each bureau might have different information, rotating requests also allows people to see their credit status over a period of time, as opposed to ordering all three reports at the same time.
For folks with damaged credit, taking charge of rebuilding one’s credit is often better than relying on a credit repair service, Arnold said.“The vast majority of these are fishy,” Arnold said. “They charge fees and rope you along and can even mess your credit up even more.”The good news is that lenders are more open to working with borrowers these days due to the extent of the financial meltdown, Arnold said. So whether a person is about to get in financial trouble or already knee-deep in the credit mud, contacting the lender and trying to work out a resolution is always a good idea. Lenders also look at each case individually and will factor in special circumstances — including those brought about by today’s tough economic times — when considering a prospective borrower’s application, Osorno said.In due time, even people with the worst possible credit can get back in good standing and erase the proverbial scarlet letter that comes with bad credit, Osorno added.“People change their risk profile with every payment they make,” Osorno said. “Payment by payment, one month turns to two months then to 12 months. It’s never too late to positively impact your credit score.”At the top of the list of things that can ruin one’s credit is bankruptcy. Bankruptcy can stay on a credit report for seven years — 10 years if it’s Chapter 7 or Chapter 11 bankruptcy, Katz said. Second most damaging is a problem familiar to many Nevadans: foreclosure. Foreclosure info can stay in a person’s record for seven years.Bankruptcies and foreclosures are especially damaging because a borrower already has severely damaged credit even before reaching that point by virtue of all their delinquencies. The impact of a short sale, on the other hand, varies depending on the action taken by a lender, with some short sales not even showing up on a credit report, Katz said.Other negative items that can stay on a report for seven years include having an account go to collections, charge-offs for payments deemed uncollectable, lawsuit judgments such as unpaid child support, and tax liens. One thing to remember is that accounts that go to collections can re-date if a new account number is assigned, further extending its time on the record. Charge-offs and tax liens also stay in the credit record even if they are paid off, although unpaid tax liens stay longer at about 15 years.Just because a person pays on time does not immunize a credit score from falling. The crash of the financial markets, for example, has led risk-averse creditors to either close credit card accounts for non-usage or shrink credit limits, both of which negatively impact credit utilization. Such drops are especially crucial nowadays as many lenders are requiring higher scores for the best rates. Two years ago, a score of 680 allowed borrowers to get the best interest rates, Katz said. Now it’s closer to 740 or 750.

“Credit scores have been moving targets,” Arnold said. “It’s much tougher to get credit these days.”

 For more information, please visit: http://www.rgj.com/article/20090531/BIZ/905310329?GID=YufQcNUTpcNhfWkCvEmu99zVlN20vVKbwCD/d0/MJk4%3D

Filed under: CREDIT REPAIR, UNCATEGORIZED