CreditCardsAct

Due to economics down turns peoples’ credit score went down. You can protect your credit score by knowing what impacts, actions affect it and how:

1. Your card issuer reducing your credit limit

A FICO study of 11 million credit files from April 2008 to October 2008 found little to no negative impact on most scores, including those of people whose credit limits had been cut. Majority of people had no risk trigger (late payments, over limit charges, or collections activity). For those who did show risk triggers, the scores dropped slightly in response to other credit-report changes.

2. Paying down or paying off your credit balances

Reducing your total credit use as a percentage of your available credit will help your credit score. Paying down balances is one of the most effective ways to improve your credit rating.

3. Closing a credit-card account after a rate hike

It can hurt your credit score in a way; if you had a large credit line and a low balance. That’s would happened because the scoring model will no longer include your vast, unused credit from this account when calculating the percentage of total available credit you’re using. If you would still maintain a sizable balance on the account, the negative effect would be smaller.

4. Getting a mortgage modification or short-sell your home

The impact will probably be negative, it depends on your other credit and how the lender reports the transaction. Under a modified loan agreement, your lender will agree to accept a lower amount from you than you committed to repay when you took out the loan. If other bad marks are showing on your credit file, renegotiating a loan might not do much more damage. If this is your only problem and your lender reports the deal as “paid as agreed,” the scoring model will never know about this special debt relief. But if a loan modification or short sale is reported as “partial payment” your score could undergo considerable damage. Before entering a special payment plan, you have to ask how the lender will report it.

5. Getting debt relief from a credit counselor

If you enter into a “partial payment agreement” with a debt-relief firm, it’s usually reported to the credit bureaus.

6. Getting a ‘goodwill correction’ from a lender

FICO doesn’t track changes on your credit file, so if a negative item is removed by a creditor today, the scoring model won’t know it ever existed.

7. Adding to your credit report an explanation of why you defaulted

Lenders don’t pay any attention to that explanation on the credit. Even if your file is flagged because you’re a victim of identity theft, the FICO model won’t adjust your score. But lenders do have special processing for applicants who are victims of ID theft, and credit bureaus have a process for removing fraud-related information.

8. Paying the mortgage and auto loan but fall behind on your other bills

The FICO model doesn’t weigh delinquency of one type of loan any more or less than a missed payment on other types of credit. And even bills that aren’t generally reported to credit bureaus could eventually show up on your credit report if the unpaid debt is sent to a collection agency.

9. Being rejected for a loan several times

The scoring model doesn’t know if you’ve been denied credit, but it will see all the prospective lenders’ inquiries. The actual impact on your score is very small. That is why is very important to ask credit in person, and ask the loan officer if the lender’s credit standards have been tightened and what your predictions for approval are. If you’re loan shopping, do so within a 14- to 30-day period. The FICO model counts all inquiries related to car loans and mortgages that take place within that period as if they were a single inquiry.