Credit FICO Beacon Report Scores - Repairing rating myths.

Credit FICO Beacon Report Scores - Myths about repairing your rating.

One myth being spread about FICO - Beacon credit report rating scores repair is the notion that paying off old collection and charge-off accounts will improve the borrower's chances of getting pre-approval for their home loan application.

For the most part, bad rated credit FICO (Fair Isaac Corporation) and Beacon scores, ratings and derogatory items remain in a consumer's report file for seven years -- Chapter 7 bankruptcies last 10 years -- that's seven years from the date last active. By paying off these old accounts, the date last active changes from say, six years ago, to the current month, and the seven-year clock starts all over again affecting credit FICO and Beacon report scores longer term. Repairing your rating is usually a mater of time and doing the right things, being careful not to unwittingly do the opposite.

To make matters even worse, the report credit scores for FICO and Beacon are weighted by how recent the derogatory accounts are. Hers a rating repair tip, a one-month-old "Paid Collection" account does far more damage to a FICO score than a six-year-old "Charge Off." While it may seem ironic that making good on one's obligations can hurt a consumer's credit scores report and FICO / Beacon, it does. Trying to repair a credit rating can actually do damage. Request a free credit score report with any home loan application. Subprime lenders make bad credit mortgages at fair rates.

A client in this situation may have a couple of effective methods at their disposal. If the client has the cash to pay off the old accounts, they should call the lender reporting the collection account. It is important that they insist on speaking with a manager that has authority to negotiate settlements. Once this individual is found, you should offer a settlement of 70% or so (be flexible) of the outstanding balance. This offer must be on the condition that the status of the account be reported as simply "Paid", not "Paid Collection" or "Paid was 60", etc., and the date last active remain unchanged. Make sure the you receive this agreement in writing prior to making any payment.

It is important to note that the older the account is, the easier it is to negotiate such a settlement. The client should simply let the old accounts fade off with time.

A common myth is the impact of inquiries on a credit report's Beacon / FICO scores. A few inquiries will NOT hinder your attempt to repair your rating.

Inquiries fall under the general category "Pursuit of New." Also in this category is "Length of Time Since Most Recent Account Established." I can assure you that two new charge-card accounts opened last month will do far more damage to a FICO score and credit report than a few inquiries made in an attempt to repair your rating. Additionally, the entire category "Pursuit of New " is fourth on a list of five categories that have an affect, and is estimated to carry a weight of 20%-30% in determining a FICO / Beacon score. Simply, inquiries, unless excessive and recent, have very little impact on credit report and ratings repair.

Even more important is the way mortgage inquiries are now handled. First, they have no impact on for thirty days (the same applies to auto loans). Additionally, all mortgage inquiries within a 14-day period count only as one single inquiry.

Because the final credit rating score number is a composite of all the applicant's credit information, no single factor like a late payment or a bankruptcy will be the sole cause of an unacceptable number.

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