A Few Facts About Your Credit Score.
Statistics from your credit report define what your credit score is. Your credit score is not stored with your credit report, but is generated at the time there is a request to your credit report.
Why are credit scores used?
Anytime you apply for a loan the credit score effectively tells the lender based on a score rating, your ability to repay the loan based on your prior payment history, and your current credit status. Everyone from banks, auto dealers and mortgage companies utilize this method of credit rating to determine the risk.
There are other factors when applying for a loan, or purchasing a car that include an applicant’s income, length of employment etc. Many times additional household income is taken into consideration as well. The purpose many times for this is to account for the possibility of a co-applicant being added to the loan should the primary applicant’s credit history or score or length of employment fall short of meeting the requirements for the loan.
What can impact a credit report or credit rating?
The number of late payments made to a creditor.
“Charge-off” accounts.
These are accounts where payments were discontinued by the borrower leaving a remaining balance that was never paid off.
The total amount of debt. Inquires made recently against your credit.
This can be a flag to a lender if there are a great deal of inquiries on a persons credit report suggesting to the lender that the applicant is making a great deal of attempts for a loan and can be increasing their debt in the very near future. This will effect the “Debt to Income” ratio as well as the credit score that many lenders consider, and this can result in a delayed or declined application.
There are regulations in place that protect individuals from the type of information that can be used in evaluating a persons credit worthiness. The Equal Credit Opportunity Act does not permit race, color, religion, national origin, gender, age, marital status or receipt of public assistance to be used as any determining factors.
As always, the best practice is to apply for credit wisely.
Benjamin Cortese
http://www.articlesbase.com/finance-articles/a-few-facts-about-your-credit-score-90151.html
Is it bad for your credit score to cancel a credit card?
I have two credit cards that I want to cancel, but my wife says that by doing so it will have a negative impact on our credit score. I never use these two cards (Discover and Master Card) but I can't believe that I can NEVER cancel them without damaging my credit score. Is this fact, or just urban legend? Where can I find reliable and accurate information about this?
No, it does not affect your credit score in any way, but it will not help it improve since you will not be making payments on it, unless you cancel with a negative balance which would be more like letting it go to collections.
References :
According to Suze Orman (the financial guru on TV), it WILL hurt your credit score.
Best wishes and good luck.
References :
Your wife is right. By closing the unused cards the credit amount available to your family is reduced by that amount, thus your debt to available credit is increased. Tuck them away and keep your credit history on the up and up.
References :
Canceling your credit card will not hurt your credit SCORE. You will help your debt to income ratio (good) but you also will not be building a credit HISTORY.
We went to all cash several years ago and the only thing that it hurt was that we didn't have a recent credit history. We had previously paid off credit cards, car loans and were working on our mortgage but they wanted a current credit history. If you already have a mortgage, don't need anymore loans then cancel them. If you will need the current credit history then close one of them, use the other, pay it off each month and keep building your credit history. Otherwise, listen to Dave Ramsey….use cash get rid of credit.
If you need to reserve a hotel or air flight use your debit card with the Visa/Mastercard sign on it.
References :
Do not close the card cause it lower you available credit line. You also can use this service to pre-estimate future scores for different scenarios of credit card payments. – creditreport.fateback.com
References :