How Credit Reporting Works

Why have you been denied when applying for a new loan or a credit card?
Why when you are getting approved, you’re getting interest rates 20% or higher?
Credit Roadrunner will educate you and help understand how to stay on track as long as you are a valued client.

Credit means receiving something of value upfront with a promise to pay for it later, usually with a finance charge added by the lender. Consumers all over the world use credit to buy almost everything, including food, clothing, housing, and transportation. Unfortunately, many people struggle to control their use of credit and get overwhelmed by piles of bills for various reasons, and sometimes those reasons are out of our control. At Credit Roadrunner we believe knowledge is power and we want to share it with you!

How your credit score is calculated

Here is a chart that helps explain how your credit score is calculated.

The most important factor and what makes up for 35% of your of how your score is determined, is payment history. It’s imperative to pay your credit accounts of all types on time.

If you've missed a payment on one of your credit accounts, the late payment will be reported to the credit bureaus at 30 days past the due date and get progressively worse with each day the payment has not been made.

Paying payments late will also almost always come with penalties or fees usually starting after being ten days late and getting greater after 30 days.

 

If you have never been late before or have a good excuse and history, you can usually contact the creditor and ask for forgiveness and a refund on the fees. Unfortunately, the reporting of the late payments even if it’s the first time usually cannot be removed through a normal process.

 

Credit Roadrunner can help you get these items deleted!

The second most important factor that helps determine your credit score is the amount of money you owe vs your available balances, aka Credit Utilization.

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Credit Utilization works like this: the amounts owed on accounts totaled together as a whole divided by your credit lines.


This includes but not limited to:

  • credit cards

  • personal loans

  • car loans

  • mortgages

  • credit lines

  • installment accounts


The good credit utilization ratio is less than 30 percent. That means you're using less than 30 percent of the total credit available to you.

As an example, on a credit card with a $1,000 limit to have acceptable utilization, you would need to keep your balances $300.  Your credit score drops as your credit card balances rise above that threshold.


The third most important factor that is considered when calculating your credit score is the length of credit history, this is determined by the length of the longest open credit account you have. The lengthier your credit history the more helpful it is to your credit score.

You may have credit card accounts that you want to close for some reasons but, if it’s one of your long-standing accounts you may want to reconsider.

If you are new to establishing credit you may consider asking a “responsible” friend or family member to add you to one of their long-standing credit accounts.

You will be able to share the positive credit history from that account. Keep in mind; if you become an authorized user on their account, their credit utilization will be reflected on your account.