At Zippy, we want to make buying a manufacture home simple, online, and fast. We understand life happens and credit may not be great or even non-existent. That is okay, please still apply! While building credit with a new Zippy Loan, let’s also move towards an overall understanding of credit. Here are some tips on repair and building credit as we embark on this exciting journey.

Free Credit Report

By law, everyone is allowed a free credit report. A free credit report is available at annual credit report.com. This service will retrieve a report from each of the three credit reporting agencies. This provides everyone the opportunity to review their reports and ensure it is correct.  

Personal Identifiable Information (PII)

When a credit report is pulled, it will collect personal identifiable information to formulate a potential match. It gathers a name, birthdate, address, social security number, and employer. Because information can be inputted incorrectly and names are common, it is important to review the reports and ensure is correct.

Credit Scores

Credit scores are a three-digit number ranging from 300-850. The credit scores are typically derived from either VantageScore or FICO®. Each company creates a slightly different credit scoring model. These companies’ models have the same purpose which is to predict a person’s probability to fall behind on payments at least 90 days within the next 24 months. The creditors on the reports are a mix of automobile loans, student loans, credit cards, and so forth. Our credit report uses a FICO® score.
There are many misconceptions on how these scores are derived; however, in the chart on the right, 35% of the scores are a direct result of payment history!

Repair and Build Credit

The positive and negative credit will remain on a report. Some items such as bankruptcies and collections will eventually drop off. Generally, most creditors/lenders will not be concerned about late payments from a few years ago. The good news is that credit can be repaired and rebuilt. Time will also heal past credit issues.

Credit Score Model

Payment History (35%)

This is a complied review of payment history from each creditor. A payment made after 30 days past the due date is considered a late payment. The more frequent the late payments, the lower the score.

Amounts Owed (30%)

This component is the current balance owed compared to the credit limit. The higher the amount owed compared to the balance, the lower the score.

Length of Credit History (15%)

The length of credit history is the time the credit has been used. It considers the number of years opened and types of credit.

Variety of Accounts (10%)

This is an evaluation of the variety of credit accounts one has. A good mix of accounts will be reflected positivly. For example, if a credit report includes both installment loans (fixed loans) and revolving credit.

New Credit (10%)

This is an assessment of new credit opened. A high number of inquiries for new loans may decrease the credit score.

Tips on Repairing and Building Credit

• Tip 1. Pay Bills on Time ~ The credit report records monthly payments to each creditor. The payments are considered late if the payments are received after 30 days from the due date.  Making payments within 30 days from the due date will avoid a negative mark on the credit report.
• Tip 2. Pay Student Loans on Time ~ Student loans typically are provided each semester; this can create the loans to be entered several times on a credit report. If payments are made timely, the credit report scores are higher. However, if the payments are late, then there are several negative marks on the report.
• Tip 3.  Pay Past Due Amounts ~ Besides for making payments on time, it is best practice to pay any debt that is past due. These past due payments create an extra balance that is owed. Paying the past due payment in full will assist with a more positive overall payment history.
• Tip 4. Lower Balances on Debt ~ Reduce the balance of the debt owed to less than 50% of your credit limit. Keeping low balances compared to credit limit will increase credit scores. 
• Tip 5. Keep Old Accounts Open ~ Keeping older accounts open can create a longer credit history.
• Tip 6. Build Your Credit ~ A few options to build credit is to open a retail credit card, obtain a credit builder loan from a credit union (small loans that are paid off in short period of time), or open a secured credit card. Keeping the balances low and paying them on-time, is the key to success. Finally, if rent is paid timely, it is possible to use a service such as RentTrack. This service will report your payments to all credit bureaus.
• Tip 7. Obtain Credit Counseling ~ If there are significant credit issues, it is important to avoid credit repair scams. A better alternative is to meet with a non-profit credit counselor to set up repayment plans. A good place to start is with HUD.GOV for assistance.

Disputing Credit

Because the PII such as your name and address are the first matches on the credit report, it is possible to have inaccurate information on the report. There are a few options to correct the inaccuracies. First, contact the credit bureau agency that is reporting the information. By law the agency must investigate the claim. Second, the more direct route is to dispute the claim with the creditor that is reporting it. Finally, if a desired response is not received from the creditor or bureaus, it is   possible to submit a complaint with  Consumer Financial Protection Bureau or hire an attorney.