Many people who previously had average or good credit now have bad credit due to the recession, illness, job layoffs and just being unable to make their mortgage payments. Restoring your credit can be a tedious task. It takes lots of hard work and is the reason why you may have been denied credit. Your credit report can at times seem like a maze.
One of the major factors in understanding your credit report and your credit score is the reason codes listed on your credit report. Some reason codes that may appear on your credit report are:
1. Length of credit history – this means how long you have had credit, either a loan or credit card
2. Too many inquiries – this means you have had more than 1 company pull your credit report within the last 12-24 months and this lowers your credit score
3. Too many new account – this means that you are considered a risk because you opened more than 1 new account within the last 12-24 months which also lowers your credit score
4. Account balances too high – this means that your credit cards are maxed out of the balance on your credit cards are above 30-50% of the credit card limit
5. Number of revolving and installment accounts – you need to have a mix of revolving (credit cards, line of credit) and installment accounts (student loan, car loan, mortgage, etc.)
6. Recent delinquency – you had one or more account that were recently paid late
Your credit score consists of the following: your payment history which accounts for 35% of your credit score, the amounts owed which accounts for 30% of your credit score, the length of your credit history which accounts for 15% of your credit score, new credit which accounts for 10% of your credit score, and the types of credit used which accounts for 10% of your credit score.
If you disagree with any of the information or explanations on your credit report or credit score contact the credit bureau reporting it to dispute the information and ask for a listing of the accounts that caused your score to be low.
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