On May 7th. 2010, I wrote about how little credit it takes to have a great score. Today we look into this a little further, and contrast two different credit profiles. It’s all in the management!
Here is an example of damaged credit:
Total Credit Lines in history: 6. “DLA”=Date of Last Activity
1. Open Collection $481 Balance
2. Auto Loan. $16574 High Credit Limit. 62 Months old. $0 Balance, Paid off 6 months ago. No lates.
3. $146 High Credit Limit. Paid Charge off. 46 Months ago.
4. Medical Collection. $100 High Credit Limit. Paid 47 Months Ago.
5. Bank Credit Card. $600 High Credit Limit. 40 months Old. 0 Balance. DLA 39 Months ago. No lates.
6. Store Credit Card. $0 Balance. 12 Years Old. DLA 9 years ago. No lates.
The Credit score is 643. Although one collection and one charge off were paid off several years ago, the open collection is still damaging the score. Another factor is the ratio of good-to-derogatory credit items. In this case, addressing the open collection (in the right way), creating occasional activity on a new line of credit or two and on trade lines #5 &/or #6 will help to re-build this score over time.
Let’s compare this example with another.
Total Credit Lines in history: 4.
1. Secured Credit Card 72 Months old. High Credit Limit $300. Current Balance $204. DLA 1 month ago.
2. Secured Credit Card 72 Months old. Reported Stolen, $0 Balance. DLA 48 months ago. (Re-issued as account #1.)
3. Credit Card 3 months old High Credit Limit $1000. Balance $0. DLA 3 months ago
4. Charge Account. 48 Months Old. High Credit Limit $550. Balance $0. DLA 4 months ago.
The credit score is 783! This shows that if obligations are met, it is not necessary to have several different types of credit, more than a couple of trade lines, frequent activity, or even more than modest amounts of credit available to achieve an outstanding score.