Repair credit score quickly for the right type of loan : Bad Credit Advisor

Repair credit score quickly for the right type of loan

When trying to repair credit score quickly, the majority of consumers think immediately of 5 main components which influence credit scores in the following proportions -

Payment history including late payments, bankruptcies, collections, judgments - 35%
Debt utilization expressed as the ratio of revolving balances to total revolving credit - 30%
Credit history length, for how long the accounts have been open - 15%
Type of credit, credit cards vs. installment loans - 10%
Hard inquiries resulting from applications for new credit - 10%

That could be one of the biggest misconceptions on the subject of credit score repair that potential borrowers have, as these proportions may change from the type of a loan the consumer is looking for. If you must repair credit score and do it quickly, understand that Equifax, TransUnion and Experian use at least three different scoring models for three different types of credit - mortgages, auto loans, and consumer credit, because these different types of loans carry different default risks. These credit score models differ in what they mean to predict, the statistical methods used to determine a credit-worthiness score, and what data are used and how they are weighted, so you need to take a different approach to repair credit score each and every time. Equifax uses Beacon 5.0 for home mortgages, but Pinnacle model for auto loans. TransUnion uses FICO Classic 04 and Empirica Auto 95, while Experian uses Isaac/Fair Model II and Advanced Risk Model respectively.

So between two models used by the same credit reporting agency, the credit score can differ by 50-60 points and sometimes more, resulting in quite different rates for a home mortgage and a car loan. Since cars depreciate very quickly and homes tend to, at the very least hold their value, the current debt weighs much more for the auto loans. That is why when aiming to repair credit score, concentrate on the factors that influenced the model you would need the most. More on how to repair credit.

To complicate the matters further and confuse you even more, a lender today often offers a free credit score which is not used at all, when you actually apply in the same lending institution. Billed as great free service, it can only make matters worse. Experian Advanced Risk Score 2.0 is one such example. Also see fix credit score fast.

Thu Oct 22, 2009 09:10AM by Tony | More in Credit Repair | Comments (0)

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