FICO scores, the credit scores lenders use to evaluate a loan application contain a complex set of algorithms to arrive at their mythical number. Anything above 740 can be considered excellent credit while scores below 620 can be low enough to deny someone a mortgage. What is the best way to keep credit scores high? FICO scores use five main ingredients when composing a score, with different weight being placed upon the different categories. Those categories are:Payment History,Available Credit,Length of Credit,New Credit/Inquiries,Types of Credit,While no one but the folks at FICO know exactly how these five categories interact with each other to produce a score, we do know that Payment History and Available Credit amount to nearly two-thirds, 65 percent to be exact, of the calculation of a score.
As obvious as it seems, paying your bills on time is very important. Something as simple as one 30-day late payment can stay on your credit report for 7 years. A late mortgage payment can hold you back from obtaining a loan for a year or mean the difference between a great interest rate and a poor interest rate. Also weighted heavily are collections, charge-offs, judgments and bankruptcies. These types of issues generally affect your credit rating in the most negative way. It is certainly possible to have these issues corrected in time. The important thing is to become knowledgeable about your credit in order to correct these issues as well as prevent them from occurring in the future.
Maintaining low balances contributes to the second largest factor in your credit score. As a good rule of thumb, it is a good idea to owe approximately 10% of your total credit limits. For instance, if you have a $1,000 line of credit, you should maintain a low balance of $100 on any given month. Owing too much money on accounts shows that you are a risk factor and are unable to pay account balances down. Creditors want to deal with consumers who can show restraint and discipline with credit lines. You want to show creditors that you are responsible and will pay them off in time. You don't want to show that you have a high dependence on credit.
The things that damage your credit score the most are late payments, collections, Bankruptcies, foreclosures, tax liens and judgments. If you have any of these types of credit accounts you will see credit scores in the low 500's and not sufficient to receive a loan from current lenders.It make good sense, if you have a lot of high interest loans, high loan to value credit cards and collections, to refinance your home or take out an equity line and pay off these small loans. This action can raise your FICO score dramatically and make it possible to get approval from a bank for a better loan rate.
A score of 750 or more will give you the best interest rates and the best chance of being approved for a loan. On the other hand, with a of 600 or less you will have a hard time finding a lender who is willing to give you a loan. And if you find it, you will have to pay a lot of money in interest just because of that low score.That's why you have to improve your credit score as soon as possible (if you have a low one or not): To avoid high interest rates.To save thousands of dollars in interest in the long run.And to get the house or car of your dreams at the lowest cost possible.
A healthy mix of different accounts is best. You want your credit report to be comprised of credit cards, mortgages and auto loans. You don't simply want to have credit cards listed on your credit report.When a company pulls your credit report to qualify you for credit, this is called an inquiry. An inquiry will stay on your credit report generally for 3 years. It is very important to limit the amount of inquiries on your credit report. Although inquiries only contribute to 10% of your credit score, too many inquiries in a short period of time makes a consumer appear to be out of money and desperate for credit, and this becomes a risk in the eyes of potential creditors. It also implies to creditors that you may be opening new accounts, which as stated above pushes your credit score down.
The bureaus use the information contained in your credit report to calculate your score. The three major credit bureaus use the FICO scoring system, which ranges from 300 to 850.What Exactly is Your Credit Score Made Of? Your credit score is made of five different parts:Payment History (35%) Payment history refers to the ability to pay your bills on time. It represents 35% of your credit score. Your history is considered the best indicator of your future financial behavior. Late payments, missed payments, loan defaults, unpaid taxes, and the worst of all, bankruptcy, will all hurt your score.It's also important the amount of negative events and when these events happened. Newer events affects your score more than older ones. More severe events (like bankruptcy) are worse than less severe events. And many events hurt your score more than only a few of them.
There is no greater embarrassing moment than the one where you have applied for a loan and it is declined because you have a poor credit score. Such embarrassment is reversible though; there are ways you can get back on the horse so to speak. It is important however to know how you got where you are to know what to do or not to do to avoid falling into the same trap again. As much as you would like to blame it on anyone, a poor credit score is usually borne as a personal responsibility. However, there is always the proverbial light at the end of this especially dark tunnel, here is how:Start from the bottom up,Improving your credit score just like the way everything else begins from the bottom. You need to know how you got there so that you can get out. Consider this as a maze; you have to go back the same way you came to get out of it. When working to improve our credit rating, you have to know what you did wrong so that in future you avoid doing the same thing.
The one and most efficient ways of doing this is to peruse through your credit reports; these are detailed reports of your credit activity over the past year or years depending on the time. Look through it to see what lowered your credit score and work to improve it by not doing such things.Settle any outstanding debts,The report will tell you where you have debts and how much you owe whether credit card payday loans. This information will then help you to reduce these debts by paying them off or at least making arrangements on how to pay them if the debt is not within your ability. The fact that you have started on the payments is an improvement on your credit score.
Self-evaluation of your credit report will help you evaluate what kind of credit ratings you still have. Nowadays, if you want a complimentary copy of your credit report, you could easily go online and find one. Some even offer a free trial service.Learn How to Improve Your Credit Score,Your FICO score can establish just how excellent or bad your credit rating is in addition to the national average rating. Learn how to improve and maintain your credit score. Monitor and keep track of your credit score on your own. You will not only learn how to preserve an excellent credit score and rating, but aid your nation in maintaining a good average credit rating and help in stabilizing the economy.
As obvious as it seems, paying your bills on time is very important. Something as simple as one 30-day late payment can stay on your credit report for 7 years. A late mortgage payment can hold you back from obtaining a loan for a year or mean the difference between a great interest rate and a poor interest rate. Also weighted heavily are collections, charge-offs, judgments and bankruptcies. These types of issues generally affect your credit rating in the most negative way. It is certainly possible to have these issues corrected in time. The important thing is to become knowledgeable about your credit in order to correct these issues as well as prevent them from occurring in the future.
Maintaining low balances contributes to the second largest factor in your credit score. As a good rule of thumb, it is a good idea to owe approximately 10% of your total credit limits. For instance, if you have a $1,000 line of credit, you should maintain a low balance of $100 on any given month. Owing too much money on accounts shows that you are a risk factor and are unable to pay account balances down. Creditors want to deal with consumers who can show restraint and discipline with credit lines. You want to show creditors that you are responsible and will pay them off in time. You don't want to show that you have a high dependence on credit.
The things that damage your credit score the most are late payments, collections, Bankruptcies, foreclosures, tax liens and judgments. If you have any of these types of credit accounts you will see credit scores in the low 500's and not sufficient to receive a loan from current lenders.It make good sense, if you have a lot of high interest loans, high loan to value credit cards and collections, to refinance your home or take out an equity line and pay off these small loans. This action can raise your FICO score dramatically and make it possible to get approval from a bank for a better loan rate.
A score of 750 or more will give you the best interest rates and the best chance of being approved for a loan. On the other hand, with a of 600 or less you will have a hard time finding a lender who is willing to give you a loan. And if you find it, you will have to pay a lot of money in interest just because of that low score.That's why you have to improve your credit score as soon as possible (if you have a low one or not): To avoid high interest rates.To save thousands of dollars in interest in the long run.And to get the house or car of your dreams at the lowest cost possible.
A healthy mix of different accounts is best. You want your credit report to be comprised of credit cards, mortgages and auto loans. You don't simply want to have credit cards listed on your credit report.When a company pulls your credit report to qualify you for credit, this is called an inquiry. An inquiry will stay on your credit report generally for 3 years. It is very important to limit the amount of inquiries on your credit report. Although inquiries only contribute to 10% of your credit score, too many inquiries in a short period of time makes a consumer appear to be out of money and desperate for credit, and this becomes a risk in the eyes of potential creditors. It also implies to creditors that you may be opening new accounts, which as stated above pushes your credit score down.
The bureaus use the information contained in your credit report to calculate your score. The three major credit bureaus use the FICO scoring system, which ranges from 300 to 850.What Exactly is Your Credit Score Made Of? Your credit score is made of five different parts:Payment History (35%) Payment history refers to the ability to pay your bills on time. It represents 35% of your credit score. Your history is considered the best indicator of your future financial behavior. Late payments, missed payments, loan defaults, unpaid taxes, and the worst of all, bankruptcy, will all hurt your score.It's also important the amount of negative events and when these events happened. Newer events affects your score more than older ones. More severe events (like bankruptcy) are worse than less severe events. And many events hurt your score more than only a few of them.
There is no greater embarrassing moment than the one where you have applied for a loan and it is declined because you have a poor credit score. Such embarrassment is reversible though; there are ways you can get back on the horse so to speak. It is important however to know how you got where you are to know what to do or not to do to avoid falling into the same trap again. As much as you would like to blame it on anyone, a poor credit score is usually borne as a personal responsibility. However, there is always the proverbial light at the end of this especially dark tunnel, here is how:Start from the bottom up,Improving your credit score just like the way everything else begins from the bottom. You need to know how you got there so that you can get out. Consider this as a maze; you have to go back the same way you came to get out of it. When working to improve our credit rating, you have to know what you did wrong so that in future you avoid doing the same thing.
The one and most efficient ways of doing this is to peruse through your credit reports; these are detailed reports of your credit activity over the past year or years depending on the time. Look through it to see what lowered your credit score and work to improve it by not doing such things.Settle any outstanding debts,The report will tell you where you have debts and how much you owe whether credit card payday loans. This information will then help you to reduce these debts by paying them off or at least making arrangements on how to pay them if the debt is not within your ability. The fact that you have started on the payments is an improvement on your credit score.
Self-evaluation of your credit report will help you evaluate what kind of credit ratings you still have. Nowadays, if you want a complimentary copy of your credit report, you could easily go online and find one. Some even offer a free trial service.Learn How to Improve Your Credit Score,Your FICO score can establish just how excellent or bad your credit rating is in addition to the national average rating. Learn how to improve and maintain your credit score. Monitor and keep track of your credit score on your own. You will not only learn how to preserve an excellent credit score and rating, but aid your nation in maintaining a good average credit rating and help in stabilizing the economy.
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