Q & A

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Hey Credit Cowboy, how is a credit score actually determined?

Credit is not a mystery, it is a simple mathematical equation.  Like Captain Kirk from The Star Trek Movie changed the computer program parameters on the "no-win scenario", we too need to change the math of an ailing credit profile.  This gives us the ability to win the seemingly "no-win credit scenario" which many people mistakenly believe.  Here is a breakdown of how credit really works.

Payment History-Do you pay your bills on time?  The answer to this question is very important. If you have paid bills late, have had an account referred to a collection agency, or have ever declared bankruptcy, this history will show up in your credit report.  Payment history holds the most weight on your score.


Debt Level-What is your outstanding debt?  Scoring models compare the amount of debt you have &your credit limits. If the amount you owe is close to your credit limit, it will have a negative effect on your score. Ideally keep balances abetween 10-20 % of your credit limit.


Length of Credit-How long is your credit history?  A short credit history may have a negative effect on your score, but a short history can be offset by other factors, such as timely payments and low balances.


Inquiries-Have you applied for new credit recently?  If you have applied for too many new accounts recently, these may negatively affect your score. However, if you request a copy of your own credit report, or creditors are monitoring your account or looking at credit reports to make prescreened credit offers, these inquiries about your credit history are not counted as applications for credit.


Mix of Credit-How many and what types of credit accounts do you have?  Many credit-scoring models considerthe number and type of credit accounts you have.  A mix of installment loans and credit cards may improve your score. However, too many finance company accounts or credit cards might hurt your score.

I am tired of having so many credit cards, is it a good idea to close my credit card accounts?

I understand that credit debt can be daunting, & well let's be honest, even a drag.  It is sure fun to spend, but paying back extensive credit card debt, isn't much fun.  I would like to caution you from closing any accounts.  There are two reasons why it is a bad idea.  #1 It stops the age of growth on your credit profile on not only that account, but slows your overall age of growth on your credit profile.  We always want to be more established.  #2 is it cuts down your credit limits, which in turn can affect your debt ratio negatively.  Remember, credit card utilization is key to a healthy credit profile.  Closing cards is rarely the answer, except in the case where ultimately one finds themselves heading toward bankruptcy.  Try to avoid closing any credit cards at all cost.

I just noticed a credit pull from a collection agency, what gives here? Is this legal?

I have seen this happen to clients here at Credit Law Solutions on several occassions.  According to the Fair Credit Reporting Act, which regulates the laws governing consumer credit reports, any business can access your credit history without your permission provided the business has a valid “permissible purpose.” The FCRA notes that one such permissible purpose is to review your credit information in connection with the collection of a debt. Thus, if you owe money to a debt collector, the debt collector has the legal right to pull and review your credit report.  

But what are they pulling your credit for?  Debt collectors have a variety of reasons for wanting access to your credit reports. A debt collector might conduct a credit inquiry is if the company cannot locate you. Your credit report contains your current and past addresses – making it easier for the company to track down your current whereabouts and contact you about your debt.  They also may be looking at if you currently have the ability to re-pay your original debt.  If they see you have obtained credit recently, such as home loans, car purchases, or additional credit cards, they may feel it well worth their while to follow up with you.  

What is the ideal amount of credit cards someone should have?

While many experts say there is no magic number, The Credit Cowboy likes his clients to have between 3-5.  Why?  because I am trying to make you the healthiest borrower possible.  I like a mix of 2-3 revolving credit cards, sprinkled in with 1 or 2 Department store cards thrown in.  The purpose of credit cards is to show that you are fiscally responsible. 


But, while 3-5 isn't too many credit cards to get most people into trouble, you have to know yourself.  Will you live off the plastic?  If so, then maybe 2 credit cards is perfect for you.  Credit cards are a means to an end.  We want to build your credit profile up, yet at the same time have a lot of breathing room on your credit card utilization.  With credit card usage, "less is more".

My mom wants to add me as an authorized user to help my credit, is this a good idea?  To be honest, I am a little confused about what an authorized user is.... 

An authorized user is simply someone who holds a credit card in his or her name but is not the primary cardholder of the account.  While they can use the card without restriction, an authorized user never has an obligation to make payments, not even on their own charges.

If you are being added as an the authorized user to your mom's credit card account it can be a credit-building plus, as long as your mom pays the account as agreed. You get "The Good, The Bad, & The Ugly" of an account as an authorized user.  If mom pays late, your score will drop like a rock!!!  If she pays on time......You rock!!!


Quick note here: this can depend upon the credit card issuer.  Some credit scoring models have discontinued the practice of allowing authorized users to ‘piggyback’ on the good credit of the primary account holder with an authorized user credit card, though it does still happen.

If you’re thinking of being added as an authorized user for that purpose, you’ll first want mom to check with the card issuer to see if they report authorized users to the credit reporting agencies, and, if so, if the account is reported as if it was their own. 

If it is, the credit account will be listed in the authorized user’s credit file. And this will help the authorized user to build and improve his or her credit score, as long as the primary account holder continues to make on-time payments to the account.

I recently added my daughter as an authorized user to my Credit One Bank card, & while they gave her a card, they do not report to the Bureaus on her behalf.  They only report for a spouse as an authorized user.  So make sure you call first.

Why do I need credit? I pay cash for everything....

Cash is King, but Credit is Queen.  There are a few personal reasons to not go the credit route, such as not wanting to pay anyone a dime of interest. Maybe you are extraordinarily rich, or you cannot handle over-spending.  But the reality is the majority of people really do need credit.  Even the rich & famous purchase with credit....


You need credit to: Buy a house with a mortgage, purchase a car, rent an apartment or car, even get a job.​  With no credit, doors are closed tightly to you that would otherwise be open to you if you had credit.  If you’ve been holding out on building credit, don't wait any longer.  You’re holding your life back and making it harder.  Having credit doesn’t mean you have go overboard, spend like crazy & to go into deep debt. Credit is a means to an end & can have huge benefits. Don't wait, start building your credit today

What is credit monitoring, & do I need credit monitoring?

Credit monitoring allows you to see what exactly is actually going on with your credit at all times. You can check your credit score as often as you like and track changes in your credit report from each of the three credit bureaus.


If you want a better credit score, credit monitoring can help you to keep a watchful eye on your credit & increase the odds of you being successful.  You don’t necessarily need credit monitoring to build better credit, but without it the best you can really do is make educated guesses about the impact your actions are having on your credit score.

Here are the three main reasons you’d invest in credit monitoring:

  1. You’re working to build better credit. If your credit score is low, you’re just starting out, or your trying to rebuild after something like a bankruptcy or a foreclosure, then a credit monitoring service can be useful as you build your way to a better credit score.

  2. You want to take control of your credit.  If you’re using a lot of credit and want to keep your score maximized at all times, then maintaining a credit monitoring account is the best way to make that happen.

  3. You’re worried about ID theft. Whether you’ve already been a victim and are worried about fraud or you’re just concerned that your information has been compromised, then credit monitoring can also be used for ID theft prevention.