{"id":751,"date":"2008-01-30T13:37:02","date_gmt":"2008-01-30T20:37:02","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/2008\/01\/30\/how-to-score-big\/"},"modified":"2024-06-06T04:05:36","modified_gmt":"2024-06-06T10:05:36","slug":"2008-01-30-how-to-score-big","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2008-01-30-how-to-score-big","title":{"rendered":"How to Score Big! The Truth Behind Credit Reports and Your Credit Score."},"content":{"rendered":"

The links to third-party products and services on this page are affiliate links, meaning that BiggerPockets may earn a commission (at no additional cost to you) if you click through and make a purchase.<\/em><\/p>\n

As interest rates continue to plummet millions of Americans will flock to their lender to refinance and many of those will find that their credit scores prevent them from taking any real advantage of those new low rates. Borrowers that financed when rates were low previously, and their credit scores higher, were able to get a decent rate then. Now that they\u2019ve missed a few payments and lowered that score, they would likely get the same rate offered to them years ago, or worse. Let\u2019s take a look at what\u2019s in a credit report and your [tag]FICO[\/tag] score<\/strong> (The software used to calculate a great number of [tag]credit scores[\/tag] was created by the Fair Isaac Corporation–FICO). <\/span><\/em><\/p>\n

Typically, four types of information are reflected: <\/strong><\/p>\n

    \n
  1. Personal information<\/strong>. This includes your name, spouse’s name, social security number, current and previous addresses, birth date and current and previous employers. This data is culled from your past credit applications, so its accuracy is dependent upon how completely and honestly you fill out forms each time you apply for [tag]credit[\/tag].<\/li>\n
  2. Credit information<\/strong>. Included is information regarding each of your accounts with banks, retailers, credit card issuers and\/or other lenders. Credit limits as well as loan amounts and balances are detailed, along with payment patterns going back a few years.<\/li>\n
  3. Public information<\/strong>. This includes bankruptcies, tax liens and monetary judgments, and, in some states, overdue child support.<\/li>\n
  4. Inquiries<\/strong>. Included are the names of those who requested and obtained copies of your credit report.<\/li>\n<\/ol>\n

    Now not all of this information remains on your credit report permanently<\/strong><\/p>\n

    Positive credit information<\/strong> will remain on your report indefinitely, although information about an account will fall off your report if nothing new is reported for seven years.<\/p>\n

    Negative credit information<\/strong> remains on your report for up to seven years after the date of the original delinquency.<\/p>\n

    The length of time for which a bankruptcy will affect your credit depends on the type of bankruptcy that you file. Chapters 7, 11 and 12 remain on your credit report for 10 years. Chapter 13 bankruptcy<\/strong> (under which all or part of all debts owed are repaid under a court-approved payment plan), will be deleted from your report after seven years. <\/strong>All other public record information is typically removed after seven years.<\/p>\n

    Inquiries are cycled off your report after one to two years, depending on the type of inquiry. There is of course some personal information that your credit report does not reveal. It doesn’t reflect information about your race, religious preference, medical history, personal lifestyle, personal background, political preference or criminal record.<\/strong><\/p>\n

    I’ll shed some light on how lenders evaluate your report<\/strong><\/p>\n

    How are credit scores calculated?<\/em><\/h3>\n

    Credit scores are generated by inputting the data from your credit report into software that analyzes it and equates a number. The three major credit reporting agencies don’t necessarily use the same scoring software, so often the credit scores they generate for you are different.<\/p>\n

    Which parts of a credit history are most important?<\/em><\/h3>\n

    The breakdown below shows the approximate value that each aspect of your credit report adds to a credit score calculation. Use these percentages as a guide:<\/strong><\/p>\n

    35%<\/strong> – Your Payment History
    \n30%<\/strong> – Amounts You Owe
    \n15%<\/strong> – Length of Your Credit History
    \n10%<\/strong> – Types of Credit Used
    \n10%<\/strong> – New Credit<\/p>\n

    <\/h3>\n

    Your Payment History Includes:<\/em><\/h3>\n