How do credit reporting agencies determine credit scores, and what criteria do they use to raise a credit score? I know that credit scores can be lowered for things like being 30 days late on a payment or 60 days late and so forth, and for various other things, but at what point do they actually raise credit scores? For example, if you have three credit cards and sometime in the last 6 months you’ve been 30 days late on two of them, it reflects badly in your credit score, right? So then, do you regain some of those points only after 6 months of on-time payments, or is it a year, or do you regain a little each month as you pay on time…? Also, does anyone know what the maximum credit score might be for someone who has successfully completed a Chapter 13 bankruptcy plan and had it discharged 1 year ago? Would a prime rate on a mortgage be completely out of the question for someone in that situation, even if they have had a good credit history recently?
Any insight you Dopers can provide will be appreciated…
If you go to www.equifax.com and get a copy of your credit report with your FICO score, there is a FICO score simulator that will give you an idea of what certain things will do to your score. You might want to see if there a demo of it first. You might be able to get a general idea from that. Experian also has a lot of useful information in their Ask Max advice column section. Generally speaking, after being later on a couple of payments, once you get caught up your score will improve gradually with time. It will take at least a couple of years to recover completely from falling behind. If the account went to collection, it will take even longer, as collection accounts can stay on your credit history for seven years. Bankruptcies stay for up to ten years, I think.
As far as the mortgage goes, how much of a down payment do you have? The interest rate is based on the risk the bank is taking making the loan. Credit score is an indicator of risk, but can be offset by a down payment that minimizes the creditors risk. I personally know of one person who went bankrupt last year and then came into some money this year and was able to put a sizable down payment on a house ( about 35%). She was able to get the best rate, and could have gotten that rate with a bit less down, but wanted to keep her payments as low as possible.
If the main reason you’re worried about your credit score is because you want to buy a house, the best thing to do is find a good mortgage broker (one who is recommended by friends and can pre-approve you, as opposed to pre-quailfy) and find out exactly where you stand.
The rules regarding how long Equifax keeps information on credit accounts are as follows:
Credit Accounts:
Accounts paid as agreed remain for up to 10 years.
Accounts not paid as agreed remain for 7 years.
Collection Accounts:
Remain for 7 years.
The time periods listed above are measured from the date in your credit file shown in the “date of last activity” field accompanying the particular credit or collection account.
Courthouse Records:
Remain for 7 years from the date filed except:
Bankruptcy - Chapters 7 and 11: remain 10 years from date filed.
Bankruptcy - Chapter 13 non-dismissed or non-discharged remains 10 years from the date filed.
Unpaid tax liens remain indefinitely.
Paid tax liens remain for up to 7 years from the date released.
New York State Residents Only: Satisfied judgments remain 5 years from the date filed; paid collections remain 5 years from the date of last activity.
California State Residents Only: All tax liens remain 7 years from the date filed.