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Tempting Settlement Offer
Tuesday, Aug 11, 2009
Question: I have credit card debt of $4,000 and I just received an option to pay the balance in full or take a $600 settlement offer. My credit is not great and I don't own a home. Should I take the settlement offer and work on building my credit over? How long will it take to increase my credit score over time?
If your credit score is already low, then this settlement may not cause additional damage.
Let me give you a little information on how your score is calculated.
The most important step in understanding your credit score is to know what a credit score is and how it is determined. A FICO credit score comes from the Fair Isaac Company. Three quarters of all lenders
use the FICO credit score when considering requests for loans or credit which is why this is an integral part of understanding your credit score.
Given below is a rough formula used to calculate your score:
~ 35% on your payment history
~ 30% on the amount you currently owe lenders
~ 15% on the length of your credit history
~ 10% on the number of new credit accounts you've opened or applied for (fewer is better)
~ 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)
The best way to improve your credit score is to pay your bills on time and manage your credit wisely. The most important item is your mortgage. Make sure you pay it on time every month in order to maintain a good credit score. Installment loans, where you borrow a set amount to buy
Given below is a rough formula used to calculate your score:
~ 35% on your payment history
~ 30% on the amount you currently owe lenders
~ 15% on the length of your credit history
~ 10% on the number of new credit accounts you've opened or applied for (fewer is better)
~ 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)
The best way to improve your credit score is to pay your bills on time and manage your credit wisely. The most important item is your mortgage. Make sure you pay it on time every month in order to maintain a good credit score. Installment loans, where you borrow a set amount to buy
new furniture or appliances, for example, are given more weight than credit cards.
Keep your spends well below your credit limits, because your FICO credit score will definitely be lower if you are maxed out on your credit cards. Don't have more than two or three credit cards because a large number of credit cards also lowers your FICO score. Don't apply for several credit cards at one time; it makes lenders nervous and will lower your FICO score. Other factors also affect your score, such as home ownership, which raises it, and moving frequently, which lowers it. Bills.com has comprehensive information about credit scores and articles on how to understand credit scores. You can read more on the Bills.com credit score page.
I hope this information helps you Find. Learn & Save.
Best,
Bill
www.bills.com/blog/
Keep your spends well below your credit limits, because your FICO credit score will definitely be lower if you are maxed out on your credit cards. Don't have more than two or three credit cards because a large number of credit cards also lowers your FICO score. Don't apply for several credit cards at one time; it makes lenders nervous and will lower your FICO score. Other factors also affect your score, such as home ownership, which raises it, and moving frequently, which lowers it. Bills.com has comprehensive information about credit scores and articles on how to understand credit scores. You can read more on the Bills.com credit score page.
I hope this information helps you Find. Learn & Save.
Best,
Bill
www.bills.com/blog/
Also, make sure to get a free financial health check-up with Bills IQ!
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