CREDIT FUNDAMENTALS

CREDIT SCORE

550 point breakdown:

35% = 192.5 points for payment history

30% = 165 points for credit utilization

15% = 82.5 points for credit age

10% = 55 points for account mix

10% = 55 points for inquires

  

A credit score is a number lenders use to help them decide how likely it is that they will be repaid on time if they give a person a loan or a credit card. Your personal credit score is built on your credit history.

 

Your credit score is a numerical value derived from a modeling system used to predict the likelihood of default. To put it simply, credit scores are used to differentiate higher-risk borrowers from lower-risk ones. To do this, the main consumer credit scoring models, FICO® and VantageScore®, rank consumers using a 300-to-850 score, for a total of 550 points.

 

The three major credit bureaus — Experian, Equifax and TransUnion — each maintain a record of your credit use. Those reports can be slightly different, depending on whether your creditors report activity to one, two or all three.

 

 

DEBT TO INCOME RATIO

The debt-to-income (DTI) ratio is the percentage of your gross monthly income that goes to paying your monthly debt payments; this ratio is used by credit lenders to determine your borrowing risk factors. Example Gross income of $10,000 and monthly debt payments of $4,000 = 40% debt to income ratio. Most creditors prefer a 50% DTI ratio or lower.

WHAT ARE TRADE LINES & HOW CAN THEY HELP ME ?

In its simplest form trade-lines are what make up the great majority of a person's credit profile because trade-lines affect your credit utilization, credit age & credit mix, which equates for 55% of a possible 850 credit score which is 476.5 points. A strong credit profile is very important as it will determine your credit score, approval odds, and overall debt to income ratio. This is the main factors used by creditors to determine your approval odds and interest rates. 

 

Being added as an authorized user on someone's trade-line is considered non-revolving and in most cases will improve your credit score and approval odds for the time they stay on your credit. Being added to a trade-line with good credit history, will in return have your credit history mimic theirs. Example: If you are added to a 10yr old trade-line with 100% payment history and a $5,000 credit limit, this will reflect positively to creditors and you will look as if you've had good credit for those same 10yrs.

 

Creditors like to see good credit history, on time payments, and low account utilization. A combination like this can greatly improve your odds for that dream HOME, CAR and even help you obtain your own credit trade-lines.

 

Overall obtaining trade-lines provide a positive impact to you credit.

PRIMARY ACCOUNTS

A primary account is a revolving credit account that is opened in your name, in which the creditor extends credit to you as the borrower. When you open up a credit card on your own, you have a primary line. This means that you are responsible for the transactions that occur on this credit line.

AUTHORIZED USERS

Individuals who are temporarily added to someone else's lines of credit (trade lines) to improve their overall credit history and credit profile.

WHAT IS A SECURE CREDIT CARD ?

Secure cards are good for those with bad credit history or those looking to establish credit, to improve their overall credit score. Secure cards require a "financial deposit" to open the account which is used as collateral by the credit company to reduce financial losses. However after good credit usage and payment history typically 6-12 months, secure cards can be converted to un-secure credit cards, and the deposit will then be refunded.

WHAT IS A CPN's

A CPN is a Credit Profile Number similar to your SSN. Can be used for similar financial transactions just as a SSN. We do not offer, educate or sell CPN's.