Thanks for continuing on to the second part of my FICO Factors series. As mentioned in Part 1, these next five factors negatively impact your credit score in a huge way. Please make sure you have read the first part of this two part series to make sure you’re getting the full value out of the next five factors that FICO uses when calculating credit scores:
6. Late Payments
Every time you are late making a payment, the credit reporting agencies are notified. Late payments damage your credit report and lower your score at the same time. Make sure you stay on top of your payments! It’s highly recommended to use auto-payments if you’re as irresponsible as I am. Here is a bonus tip, most creditors will allow for one late payment every once in a while and not report it to the agencies. If you missed a payment, give them a call and talk to a live person when making your payment. Ask them if they are going to report it, if they say yes, give them a huge sob story on why you were late – if it’s your lucky day, they won’t report it.
7. How Far You Fall Behind on Payments
Late payments are one thing, but falling months behind on payments is EXTREMELY BAD for your credit score. When you are over 60 or 90 days late on an account, your score will drop RAPIDLY. Avoid falling behind on late payments like you would avoid a measles outbreak. After falling behind it can be very difficult to catch back up and almost impossible to get creditors to remove the stain on your credit report.
8. Unpaid Collection Accounts
Collection accounts are one of the worst possible things on your credit, especially open accounts. Open collection accounts mean you have a debt that you refused to pay. Who want’s to lend money or even rent a house to someone who has a record of refusing to pay? It’s crucial to pay your collection accounts or start working on getting them removed from your report. Removed? Yes, it’s quite possible to have collections removed without paying them off, to learn more read my 5 Required Steps To Start Your Credit Repair Process.
9. Paid-Off Collection Accounts
Congratulations, you finally paid off your collection accounts. Hopefully you already tried to remove the collection first, or at least researched how to negotiate down the amount you have to pay. Unfortunately, even though you have paid off the collection, it stays on your credit report for 7 years. Paid-off accounts will affect your credit score less and less as time goes on. The best advice if you’ve already tried to remove paid-off collections (can be tough after the fact) is just to wait it out. The collection will slowly become less important to FICO as the years pass.
10. Your Past Record Of Catching Up
You fell way behind on payments and don’t know how your credit score will ever be good again, sound familiar? Well here is some good news for you… Catching up on behind payments can actually benefit your credit score greatly. Think about it, would you trust someone more with only good credit, or someone who demonstrates they can go through bad times and still make it right by catching up on payments when they get the money? The positive effects to your credit score are not instantaneous – about a year after catching up and keeping accounts current, you’ll see your credit score start to go up quickly.
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