These are known as hard inquiries.  And if there are several of these they can drag down your FICO score.  Imagine you go out an apply for ten new credit cards.  Creditors are going to get worried and think, “Why does this person need all this credit all of a sudden?”  They have a right to be scared of you and this is the reason why applying for several credit cards will lower your FICO score.

So how long do hard inquires stay on your credit report?  Two years. After this time is over they can be removed from your credit report.  I do say can becuase that always doesn’t mean that they are.  Bankrate.com states that 70% of consumers have some error on thier credit reports.  Often these are inquires.  If you get a copy of your credit report and see these long standing inquiries, you can dispute them to have them removed.  This is a little quick way you can inprove your FICO score.

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What does carry no revolving debt really say about a person?  They have control enough not to use their credit card and save for purchases.  This is a respectable attribute and they will not be penalized when calculating your FICO score.

The real truth is you can have a excellent credit score, above 730 or so, without carrying revolving debt.  The highest scores will use revolving debt, but the interest rates you will get with an excellent score are not going to be much different if any then if you have a good  score.  Remember lenders group scores together to assign what is bad, good, or excellent.

What revolving debt does is gives you a wider base of credit and contributes to you having a healthy mix.  This factor is 10% of your FICO score and carries the smallest weight.

If you choose to not carry debt it won’t be the end of the world for you or your FICO score.  Chances are if have no revolving debt you proably are attractive to lenders.  They want a person who is this responsible.  They compare you to the rest on the consumers.  You are less of a risk and should get a good interest rate on all your loans.

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They can be on there up to seven years.  Only judgments like bankruptcies stay longer.  So a late payment is going to follow you around for the next seven years.  What the FICO formula does, it to takes into consideration how recent these late payments were.  The most recent carry a larger negative effect.  As time goes by a late payment’s effect on your FICO score diminishes.

Also, not all late payments are created equal.  The later the payment the worse it is for FICO score.  So a 30 day late payment will not be as bad as a 90 or 120 day late payment.  The effects of 90 days and later payments will also diminish over time, but their severity will always be considered when calculating your FICO score.

Here is a quick way to improve your FICO score: Check your credit report for late payments older than seven years.  These can be removed.  This sometimes does not automaticly happen and smart consumers need to watch out for themselves not just count on the credit bureaus.  BankRate.com reports that 70% of credit reports have an error on them.  Get a copy of your credit report and check it out for yourself.

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Well, this makes for some scary times.  Most people might not be thinking of their FICO score right now, but they should.  Here is what is coming down to; Your FICO score better be good if you want to get credit these days.  Lending institutions aren’t lending anyone with a job as it seems in the past.  Lending restrictions have been beefed up.  You might of heard the news on the big three and their struggles.  Well, the credit crisis they are having is because of the difficulty for buyers to qualify for a loan.  A main fact here in the decision is your FICO score.  Here is a great articles on what is recently happening in the credit market from the Washington Post.  It shows that the scores that once qualified for mortgages are not now.  Furthermore, how scores are being further segmented and the range of interest rate has increase for the segments.  This means lenders are looking are your FICO score and lower scores even by a few points (10 to 20) are getting loans are much higher interest rates.

It is interesting to see from the article the disappearance of the lower FICO score quotes.  Often many things you read state that 620 is the cut off point for many lenders and below this point consumers will have to get a sub prime loan.  It looks to be changing with the requirements of many lenders of consumers is to have a higher FICO score.  This will actually prevent millions of people from qualifying for any loan and further slowing home buying.  Now, where the line will be drawn is hard to say because this is a market that still doesn’t know where it is going.  The future for lending is tighter restrictions meaning you need to have a good or even excellent FICO score before you will qualify.  The outside factors could also play a larger role in receiving a loan i.e. job and income.  This is hard to say what is exactly going to happen as foreclosures are still running wild and as this continues, it could have effect to rise the necessary FICO score to receive a loan.

This makes it ever more important to have a good or even excellent FICO score.  Know your score and protect it.

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So why is paying late considered so negative.  If you were a lender a prime concern you have is being paid back for the money you lend.  If your borrowers starting paying late you get worried and this something a creditor just doesn’t need.  Secondly, there is a high relationship between late payments and default.  Borrowers that are late often are late for a reason.  It more than likely is because they have no money.  It is a sign of bad things to come.

For consumers paying late could put yourself in over your head.  As you pay late fees are added.  This could be just seen as pure compensation for the lenders worry or as a direct profit stream since this money will not be applied to the money owed.  A penalty of an increased interest rate could also be assessed on the account.  Together this will boost your monthly payment.  The average American consumer has several different credit cards and each carry balances.  If this was to happen on even two or three credit cards, consumers could face a tighter month to month existence because the monthly payments are eating more of the monthly income.  As this happens budgets get tighter.

This has the potential of a downward spiral.  Pushing you ever closer to your limits.  Furthermore, paying late is more often done by those of us that are close to our limits.  Increase payments will only make it more difficult to get out of the burden.

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