Thursday, November 12th, 2009
Why should you care about your credit score? Because a bad score costs you money. Credit scores are also increasingly being used for assessments by many companies outside the financial world including utility companies, mobile services, and insurance groups. Your credit score is the only rating that follows you throughout your life. Grades become unimportant once you graduate, but a credit score is – if not forever – a long term proposition.
Your credit score is a three digit number from 350 – 850. The score is a summary of all the factors in your credit report and reflects your overall credit worthiness. It tells a lender how likely you are to pay back a loan. For a fee, the credit bureaus provide your credit scores to interested lenders. You can also order them yourself.
Here are the main factors which go into your score along with their approximate weight.
People have more control than they think over their credit score because it is behavior based. You control how you pay your bills – on time or not. You are in charge of whether you open new credit accounts and so on. It’s a good idea for young adults to open an account to begin their credit history but they should approach credit with caution – many responsible young people have become overwhelmed by the purchasing power of credit and have gotten into debt.
It’s a good idea to have several different types of credit so lenders have an indication of how you handle various accounts. A mortgage, car loan, store account and major credit card are a good mix.
Things that credit score does not consider:
- Age
- Income
- Race, religion, marital status
- Interest charged on accounts
- Zip code/address
What does your score mean?
- 750-850 Excellent credit – you’ll get any loan with the very best terms
- 700-749 Very good – you qualify for highly competitive interest rates
- 650-699 Good credit
- 600-650 Fair
- 550-600 Poor
The good news is that 60% of Americans have credit scores above 700 – chances are you do, too.
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Saturday, July 19th, 2008
Good credit scores are very important in order to get some financial help from a reputed financial institution. You will have difficulties in getting approved for an auto loan or a credit card if you are not having good credit. Based on your previous credit history, you will get decent interest rates. Very often, students and recently divorced or widowed women who had been having a joint account with their husbands now face serious problems because of having a bad credit history. Follow the tips below to establish good credit.
Check with your local bank or dept. store if they report your accounts to the credit bureaus. If they do, then you may apply for a small loan or a credit card from them. Make sure that you are regular in your monthly payments and they are reporting it to the credit bureaus. This will help in improving your credit scores. It is of no use if you take a loan or a credit card from them and they do not report to the credit bureau. Opt for a loan with terms that can be satisfied without too much of financial strain. You will easily get approved for a loan if you are ready to make larger down payment. Certain credit cards come with lower annual percentage rates. Understand the terms and conditions that apply to your account before obtaining one. Applying for a lot of credit cards in a short span of time and then not able to make timely payments will be hurting towards your credit scores because the lenders may decide you incapable of meeting all the requirements. Hence you should be careful enough before choosing the credit cards.
If you want to qualify for credit without a co-signor, you have to be above 18 years of age and have a source of steady income. You may apply for a gas card which is relatively easy to avail for the purpose of establishing good credit. Make sure that you are making regular and timely payments because your creditor is going to report your repayment history to the credit bureaus and it will have a direct effect on your credit scores.
If you are having difficulties in obtaining a loan, departmental credit card or a gas card, try to get a co-signor. Then, be regular in your monthly payments. Just in case, if you have started to miss your monthly payments to your previous creditors, enroll into a debt consolidation program before it gets too late and starts hurting your scores. You will be able to take care of a severe damage to your credit scores in time.
Lenders will give you a lot of respect if you have a checking or a saving account.
Your chances of getting approved for a loan will be less if you have overdrawn accounts. Potential lenders regard bouncing checks as a reflection of the incompetent management of financial affairs.
Apart from having a good credit history, potential lenders also look at your jobs and relocate. Being the owner of an apartment or having a telephone number in your name certainly helps in establishing a good credit history.
While you are trying every possible ways to improve your credit scores, get a secured credit card at a higher interest rate after depositing an amount. Make sure that you are making timely payments and that it is getting report to the credit bureaus.
Posted in Credit, Finance | 3 Comments »