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Understanding the Need for a Good Credit Score

Imagine yourself applying for a car loan.  You have the down payment, and you have the right job to pay the loan back before the due date.  However, even if you have the right job and the money for it, you still haven't been approved for the loan.  In the United States, having money and having a high salary isn't all that will be considered.  Your credit score is equally important. Your credit history will determine if you have a high credit score or not. Having a high credit score will open a lot of credit opportunities for you. People with high credit score have a much easier time when applying for a low interest credit card and also for low interest loans. This is because creditors are sure that they will likely pay their debts on time.
 

Your credit report is a very important document that creditors, banks, certain companies, and landlords will check in order to determine your credibility. Banks, creditors, and credit card companies look at your credit history to determine if you are a person that pays bills on time.  By simply analyzing your credit history and taking a look at your credit score, they will determine if you will be approved for the loan or the credit card.  A bad credit score could mean the denial of approval for a phone line in your own home, getting turned down for a credit card, or not being able to rent an apartment. If you have a low credit score, you may get approved for a credit card or a loan, but it will usually have higher interest rates. This is because creditors aren't sure that you can pay your bills on time. It is riskier for creditors to approve you for the loan if you have a bad credit. This is why it is important for you to know how credit rating works.

If you have a credit score of more than 700, you are eligible for a loan with the best interest rate under excellent terms.  If you have a credit score between 640 and 700, you will be able to qualify for good loan terms.   If you have a credit score  between 600 and 640, you should be able to get your preferred loan without making down payment.   If you have a credit score between 500 and 600, you may be eligible for your preferred loan provided you are willing to make a down payment.  If you have a credit score of less than 500, there is a slim chance that you get your preferred loan.  Of course, factors such as the amount you want to borrow, your current income, and how many months or years are needed for repayment are factors in getting loans as well.

 

 

Uses of Your Credit Record That You May Not Expect 

Who's checking your credit score?

Credit scores are very important in today's society. Even phone companies are now taking a look of their future subscriber's credit score to determine if they will likely pay the monthly phone bills or not. With a bad credit score, just simply getting a phone line hooked up in your house can be a difficult thing to do. Some employers actually check the credit reports of applicants for jobs. They believe they can make a judgment on how you will handle your job responsibilities based on how you handle your credit in your personal life. Even if you are qualified to do the job, a low credit score can ruin it all for you.

Landlords often run credit checks on those who apply to rent available apartments as well. In this day and age when information can easily be tracked down on the internet, it is possible for a woman to check the credit rating of a man she is dating to see if the guy handles money and credit well. Or a father might check out the credit of his son's girlfriend and warn his son if he discovers credit problems. So keeping a good credit rating and a high credit score can benefit you beyond helping you to get a loan or a credit card.




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Credit Repair 

How to Fix Your Credit Score

Repairing a poor credit rating is extremely important! Paying your debts on time from this time on will have a positive impact on your credit score because it will show credit reporting agencies and creditors that you can manage your debt effectively. However, if you have overdue payments, you should find a way pay them quickly, even if you have to work hard to bring in extra income. You may have to sacrifice purchasing things and going out for fun for awhile in order to catch up on your bills. In time, old late payments will be deemed unimportant and the record of them will expire. By paying all your old debts, you can stop creditors from making negative reports to credit reporting agencies. Any bad credit history that you have will not expire for five to seven years. But it can be overshadowed by your showing that you are currently handling your debts well. You have to remember that it will take some time and patience to raise your credit rating

Another way to repair your credit score is by managing your credit cards effectively. Don't use your entire credit limit on each of the credit cards you own. For example, if you have credit cards with credit limits of $2000, $2500 and $3000, it is better to use $600 on each card rather than $1800 dollars on one card. It is best for your credit score if you only use less than 50% of your credit card limit.

If your credit rating is so low that you cannot get new credit, you could open a new savings or checking account and apply for a secured credit card from the bank where you open the account. A secured credit card will mean a higher interest rate, but it is also a good way to control your credit card spending and a good way to raise or repair your credit score. By paying the monthly credit card bill on time, you will be able to make your credit history look better.

It is important to realize that if you have a bad credit score, you will need to repair it as soon as possible. It is usually easy to get store credit cards. Build a positive credit history by charging a few things on store credit and promptly paying the bills in full. The fact that these cards will not have a huge line of credit and can show frequent usage and quick repayment will help to offset your negative credit history.

A great book that reveals the secrets of getting your credit score in order without having to pay a lawyer to help you is The Credit
Repair Bible.

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How Is Your Credit Score Calculated and Can YOU improve it? 

Find Out!

Fico Scores/Reports

FICO or Fair Isaac Corporation is the widely used company in terms of calculating your credit score. The FICO score ranges from 300 to 850. The higher your score is, the easier you can have access to low interest loans and credit cards. In the United States, a FICO score of 725.660 is considered as a break point for credit worthiness. Having this number on your credit score is just the starting number on your way to become a credit worthy person. Credit scores are calculated in the following factors:
- Punctuality of payments - This is 35% of the calculation. If you pay your bills on time or before the due date, your credit score will tend to be higher.
- Capacity used - This amounts to 30% of the calculation of your credit score. It is a ratio between the current revolving debts compared to total available revolving credit. If you use your credit card, and if you don't use its entire credit limit, you will get a higher credit score.
- Length of credit history - This is 15% of the calculation of your credit score.
- Types of credit used - This affects 10% of your total credit score.
- Recent search for credit or the amount of credit obtained recently - This will amount to 10% of the total calculation of your credit score.

Boosting Your Credit Score

Having a large number of credit cards, even if you don't owe anything on them, can pull down your credit rating. That's because you have the potential at any time of taking out cash advances or charging large ticket items, which will quickly run up the amount of your debt. So be wise in the number of credit cards you own. You may need to close some of these accounts to get your credit rating up.

Paying off loans and credit card debt will help you increase your score. If you already have a good credit score, you will want to boost it in order to obtain the best loan and credit card deals possible. For example, if you have a credit score of 688, the loan company may reduce interest rates if you bring it up to 690. The two points can mean thousands of dollars in interest savings. This is why it is very important for you to improve your credit score even if you already have a good one. It can mean lower interest rates and also more chances of getting the loans you need

An important method for boosting your credit score is to check credit reports for errors. Even minor errors can significantly hurt your credit rating. So, if you ever suspect that your low credit score is caused by an error, you should contact the credit reporting agencies and challenge them about the report. It is a law that the reporting agency should investigate and correct the errors within thirty days.

Also, get to the point in which you can pay off your credit card balances every month. This can keep you out of debt and save a lot of money on interest payments. Also, this will demonstrate that you can manage your debt effectively and therefore increase your credit score. Having only a few credit cards will boost your credit score. Having five or more credit cards will lower your credit score.

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