Mike Clover asked:


Annualcreditreport gives you a credit report free once a year, but they don’t give your credit score. I have been a lender for 7 years, and believe me when it comes to getting your loan done everyone looks at credit scores. Your credit score is a bench mark for banks to sell your loan on the secondary market. Typically investors use your middle credit score to determine your creditworthiness. Here is what myFICO® says in regards to how important it is to know your credit score.

How credit scoring helps you

Credit Score gives lenders a faster snapshot of your credit risk. Most lenders are now using FICO® to determine your score. Before the scoring process was implemented there was a biased opinion of your credit. Now there is less none bias opinion of your creditworthiness with credit score automation process with all 3 credit bureaus. When pulling your credit report with all 3 Credit Bureaus you typically get a score. Since annual does not provide this, you have to get your report through other service providers.

Here are some advantages of credit scores.

* You get loans faster Your credit scores can be delivered with a few key strokes with today’s technology. With the speedy process this helps lenders speed up the decisions making process. Even mortgage applications can be made within ours, instead of weeks.

* Credit Decisions are fairer Credit decisions can be made of facts instead of emotions. Factors like your gender, religion, race, marital status and nationality are not considered by credit scoring.

* More Credit is Available

Lenders can approve more loans because the credit scoring process gives them the information on which to base there decision on. It allows lenders to identity individuals that are likely to perform well in the future even though they have had issues in the past. Each lender has its own credit score guidelines, so if one denies you, you may get approved elsewhere. The use of credit scores gives lender the confidence to offer more credit to people since they better understand the risk they are taking.

* Credit mistakes count for less

If you have credit problems in the past, credit scoring does not let that haunt you forever. Past credit problems fad as time passes as long as new good credit patterns show up. Credit scoring weighs all credit in a file, as opposed to focusing primarily on past issues.

* Credit Rates are lower

The cost of loans decreases when more credit is available. The process of automation in the credit process is less because of the efficiency of the process, which is passed on to the consumer. Buy using the scoring process there are less defaults, and in returns saves the consumer in the long run. Credit Scores have revolutionized the lending arena, and has driven down cost for everyone.

Conclusion:

Now you know why you need to know your scores and how important it is. Recent studies show that 1 out of 4 credit reports have incorrect information on them. Plus identity theft is the fastest growing crime in America. You need to check your free credit report with scores every 90 days just to be safe in today’s times. Since your scores are the core in determining whether they will lend you money, shouldn’t you know what they are ? The answer to that is yes.



Donald

Jed Jones asked:


Credit scores are the equivalent of a financial report card. There is no way to avoid having credit scores since the Big Three consumer reporting agencies - Equifax, Trans Union, and Experian - keep tabs on your credit situation daily. These agencies then report your scores to any lender who requests it.

A credit score is also called a FICO score. If you have a low credit scores you could be turned down for home or auto loans. Your low score can also actually contribute toward your financial woes since it usually means higher monthly payments on any money you borrow.

There is hope, however! By taking the right steps, you can improve your credit scores significantly. Here are 7 tips for improving your credit scores.

Tip #1: Check your latest credit reports from each of the Big Three bureaus:

The first step toward better credit scores is to find out your current score from each of the Big Three consumer reporting bureaus. You can find a number of Web sites that give you access to this information for FREE. To find one, run a search in your favorite search engine using the keywords free credit report.

Tip #2: Immediately correct any blatant mistakes:

Download and review each report item by item, circling any blatant errors you find. Of particular importance are inaccurate unpaid balance flags, the existence of credit accounts that you never opened, and incorrect information concerning your current address. You must take each of these mistakes quite seriously and address them to both the relevant credit agency and, when applicable, the lender in question.

Tip #3: Pay your bills on time:

This is a common sense item, but people having credit problems often neglect it due to the snowballing nature of their debt situation. Paying your bills on time is very important, and nowadays even utility companies are reporting your payment history to the credit agencies. Hint: to improve your score even more, make your monthly credit card payments before the end of the statement period. This has the positive effect of keeping any charges made that month from even showing up as a balance on your cards, thereby improving your ongoing debt-to-credit limit ratio (see Tip#4).

Tip #4: Improve your debt-to-credit limit ratio:

In calculating your credit worthiness, the Big Three credit agencies factor in heavily your debt-to-credit limit ratio. As the term implies, this ratio is simply the result of dividing your total current credit card debt by the total credit limit across all of your cards. The ratio is always a number between 0 and 1, with numbers below 0.5 being most favorable. There are two ways to reduce your debt-to-credit limit ratio. One way is to simply reduce your credit card balances by paying them down. Another option that many people fail to consider: request an increase in credit limit from your creditors.

Tip #5: Pay off debt, don’t just move it around:

While it can be a smart move to transfer debt from your higher interest credit cards to your lower interest cards, this does not substitute for actually paying down your overall debt. Just moving your debt from card to card is not going to improve your score.

Tip #6: Avoid closing credit cards just prior to a loan application:

Some people believe that closing out some of their credit cards immediately prior to applying for a loan is a good idea. However, this is not true. On the contrary, it has the effect of suddenly increasing your debt-to-credit limit ratio, which is a credit score no-no. In fact, as long as you have the will power to use your credit cards wisely, it can be a good idea to keep multiple cards. Then, use these additional cards from time to time, charging small amounts and then quickly paying them off. This reflects positively in your credit scores as your having a healthy ability to manage your debt.

Tip #7: Understand the influence that bankruptcy has on your score:

As a final note, beware that having declared bankruptcy in the past can make it especially hard to achieve better credit scores. Bankruptcies can stay on your credit report for 7 to 10 years.



Keith

Ryan J Bell asked:


The Fair Isaac Coporation, creators of the FICO credit scoring system, recently discoverd that 49% of people polled did not know that credit scores measure credit risk. Even if you already know the basic facts about credit, you may not realize the impact credit can have on your life, and how your credit report plays a role.

Your credit score, like your driving or medical records, follows you everywhere you go. However, your credit score can fluctuate daily without you doing anything to directly affect it; it can even fluctuate daily! This is because creditors (like credit card companies, lenders, and mortgage holders) report your payment record on different days of the month. So if your credit card company reports good payments on the 1st, your score will go up. And if your mortgage lender reports a late payment on the 15th, your score can drop several points.

In addition, your credit score is calculated differently depending on which credit bureau you use. The mathematical engine that powers the FICO calculations is proprietary, meaning no one outside of Fair Isaac has direct access to the equation. Experian, TransUnion and Equifax all use their own calculations based on the FICO math, but they are are all different. You could have a 720 with Experian, a 744 with TransUnion, and a 729 with Equifax.

You score is sensitive to everything you do financially, so it is important to periodically find out what is going on with your credit by requesting your credit report. Regardless of the state of the economy, people in the United States and Canada will have much easier lives if their credit is good. For instance, your credit score determines:

What kind of rate you will get on all types of insurance

If you can qualify for a home mortgage and at what rate

Whether or not you will be hired for certain jobs

If you can qualify for an auto loan and at what rate

For which types of credit cards you can qualify

Refinance options for every line of credit you can take out

Mortgages For Example…

To give you an idea of the effect your credit score can have on your life, let’s consider how a home mortgage might be calculated. Assuming you are buying a home to live in for an extended period of time, you will most likely be looking for a traditional, 30-year fixed-rate mortgage. This amount of money you actually end up paying in interest on the loan will vary depending on what rate you get. And what determines your interest rate? Primarily your credit score.

For example: you are buying a home and need a $250,000 loan to cover the purchase. Your mortgage broker tells you that in the current loan market, she can offer you a $250,000 loan with a 6.750% interest rate. Your broker also tells you that if you had a better credit score, you could get the same loan but with a 5.750% interest rate.

Over the life of the first loan, you would end up paying a total of $583,738.29 for the house. For the second (good credit) loan, you would pay $525,215.57 over 30 years. The savings? $58,522.72, or approximately $162 a month.

That’s an extra $160 a month that you could put toward retirement, buying stocks, saving for college educations, or even just spending on a special night out each month!

Credit and Job Applications…

It may surprise you but the credit check is becoming a key indicator during the hiring process. Your score serves as a general measure of responsibility and organization. As the job market tightens even more, hiring managers are going to need more ways to differentiate one candidate from another. Also, previous employers are shying away from being too forthcoming about a previous employee due to threats of libel and lawsuits. It is in your best interest when job hunting to present yourself as best as possible to a prospective employer and to have your credit score in order when job hunting.

It is surprising to some people when they learn that credit checks are becoming a larger part of the job application process. While companies begin to shy away from honest evaluations of a past employee’s experience (due to lawsuits and the threat of slander allegations) managers continue to look for more ways to distinguish one candidate from another. Your credit score serves as a general indicator of your overall level of responsiblity, a good quality in a candidate no matter what the company does.

Credit Scores and Credit Cards

Your credit score affects the way you get and use credit cards in two ways: the rate of interest, and the type of card.

As with mortgages, auto loans, and other arrangements, credit card companies will determine your interest rate based on your credit score. The better your score, the lower your rate of interest. While it is usually in your best interest to pay off your credit cards in full each month, there may be times when it’s simply not possible, and a lower interest rate means lower finance charges at the end of the month.

The type of card you can get is also affected by your credit. If your credit is bad, you will most likely be offered a secured credit card, which is a type of card backed by real money (almost like a debit card). If you have good credit, credit card companies (like Visa, Mastercard, American Express and Discover) will offer perks and rewards for you to open an account with them. These perks can include cash-back on purchases, airline miles, concierge services, shopping discounts, or gas rewards. Whatever the offer, the best rewards are reserved for those with the best credit scores.

Clearly, your credit score affects your life on multiple levels: where you live, where you work, your options for how to pay for things. It is more important than ever to understand your credit report and keep it free of errors and negative information.



Joyce

Gregg Pennington asked:


When you apply for credit, whether for a mortgage, an auto loan, or a credit card, your credit score will determine whether or not you can secure financing, and what type of interest rate you can get. While you probably have at least some idea of how good or bad your credit is, it is important to understand your credit score and how it is calculated.

A credit score is a three digit number that ranges from 300 to 850. Each of the three major credit bureaus use this rating system that was devised by the Fair Isaac corporation - commonly called a FICO score. Your FICO score is calculated by measuring three distinct aspects of your credit.

1.A third of the score is based on your payment history. If you have defaulted on one or more loans, or been more than thirty days late making payments on your credit accounts, your credit score will be adversely affected.

2.The next portion of your credit score is determined by your credit to debt ratio. If you have a number of credit accounts close to being maxed out, or if your total debt is too great, this part of your score will suffer. Conversely, if you keep your credit balances reasonably low, your score will be higher.

3.The final part of your credit score takes three separate factors into account: the length of your credit history, the amount of credit for which you have recently applied , and the type of debt you have. Of the three, the length of your credit history holds the most weight. If you have established a long history of repaying your debts on time, you will be looked upon as less of a credit risk. Another aspect of your credit score is the number of recent applications you have. The greater the number, the lower the score. Finally, the types of credit you carry will affect your credit score. A credit card from a bank would have a more positive effect on your score than would a store credit card. Applying for credit with a finance company could label you a higher credit risk, and may be seen as a last resort for someone who could not get a bank card.

Once your score has been determined and made available to prospective lenders, it is often the only factor considered in determining your eligibility for credit and the interest rate you will receive. A higher FICO score will translate into savings when you apply for credit. A lower score may increase your interest rate which may cause you to have to borrow more money than you would have otherwise.

Also, information provided by credit reporting companies is not always accurate. You should acquire a copy of your credit report for inconsistencies and inaccurate items. If you find any questionable items on your credit report, you have the right to dispute them and possibly have them removed.

Once you understand the effect that debt and use of credit has on your credit score, you can devise a plan to make any necessary repairs to your credit. As your credit score improves, you will pay less when you borrow money, and you will find more and more lenders eager to do business with you.



Ruth

Jim Moore asked:


Anytime we are in a bank or see something even remotely finance related, we here the common phrase of credit score.

Most of us can likely make a fairly educated guess as to what the credit score is. However, we are unaware of the profound impact this little number can have over our financial lives.

The credit score affects much more than if you are going to get that new credit card or not. Credit scores can be the deciding factor in many of our life’s decisions and challenges.

In this article we will look at why it is so important to maintain a good credit score in this day and age.

Your credit score is most commonly associated with anything to do with loan decisions. It probably comes as no great surprise that whenever, you apply for credit card, loans, installment payment plans and mortgages the credit score is one of the major deciding factors.

People with low credit scores will likely struggle to get approval on any of these more so than those with high credit scores. By keeping on top of your finances, you can insure that your credit score remains solid.

The credit score not only decides yes or know on various types of financing, but what rate of interest you will receive. Those with good credit scores are likely to get the premium rates of interest. Those with low scores are going to be charged more. Those with low credit scores can still obtain financing but quite often they are forced to use sub-prime lenders. These lend the money but at much higher costs.

Many are surprised to hear that your credit score can now affect the rate you receive on car and homeowners insurance. Several states have started employing this policy on the evidence that statistically, those with better credit scores are less of a burden. They make fewer claims than those with poor credit.

Finally, sometimes potential employers will look at credit scores when making the decision on whether or not to hire. Those positions in the financial world are known for this. A poor credit history will make some employers reluctant to offer expense accounts and company credit cards.

Nearly all of us need credit accounts to get the things that we need today. Most of us would struggle to buy a new car without financing or a house without a mortgage.

Having credit is important and so is maintaining a good score. Keeping the credit score high can offer better finance opportunities as well as more favorable insurance rates and even that dream job.



Carla

Ken Black asked:


You need to know how credit scoring and your credit report works to get out of debt and improve your financial future. Here is what you need to know.

You may be wondering how some people can walk into a lending institution and get credit, or loans, while others that have the same income or job seem to get turned down or receive a higher interest rate. It is all about the risk factor and whether you are a safe risk, or a bad one, when you are being loaned money.

Creditors use a credit scoring system that gives them an idea of whether the person who wants to borrow money is likely to make their repayments, whether they have a history of not making repayments, or are likely to be unable to make the monthly repayments.

These credit scoring systems may go under several names. One of the most widely known credit scoring software applications is the FICO, or the Fair Isaac Corporation, and there are three variations of this software used by the three major credit reporting agencies.

What Exactly Is Credit Scoring?

Credit scoring is collected information about you and your credit history. Contained in a credit report is your bill paying history, as well as how many accounts that you already hold and what type they are. Things such as late payments, any collection actions taken against you, outstanding debts and how long you have had accounts are all considered. All of this information is compared with other consumers that fit the same profile as you to determine the type of risk that you are to the creditor.

The credit scoring system gives you points for each factor and the end result tells the creditor if you are likely to repay your debts. The total amount of your debt is then added up to give you a credit score. Your credit score is an indication on how likely you are to repay your debts and make your monthly repayments when they are due.

Find Out What What’s In Your Credit Report First - since you now know that everything in your credit report is vital to whether you are going to get the line of credit that you are applying for, it would make sense to get your credit report and take a look at what is in it.

Sometimes credit reporting agencies can make mistakes or place something on your report that is inaccurate. By checking your credit records for yourself, you can make sure that everything contained in it is true and accurate.

Before applying for anything, make sure that you obtain your credit report. An amendment in the federal fair credit reporting act now allows a consumer the opportunity to receive a free credit report when you request it, or at least each year.

You obtain your financial summary making a request to one or all of the major credit reporting agencies.

Read through your report and make sure that everything is accurate and you are happy with what has been included in the document. By reading through your report, you will also be able to see if there are good things or bad things listed on your report. This will have a bearing on whether you are likely to be given credit.

Why Credit Scoring Is Used, And Is It Fair?

Credit scoring is based on real information and statistics rather than the personal judgments of another person. Because of this, there is no variation in acceptance of a loan based on other things that are not statistically based facts. Different creditors often use different types of scoring models from agency to agency. Also, different models of the system are used for different lines of credit.

Under the equal credit opportunity act, no scoring systems are allowed to use race, sex, religion, marital status or a person’s country of origin to determine an individuals creditworthiness. Age is sometimes allowed as a scoring characteristic as long as the system is designed properly and those that are over a certain age are treated fairly and given the same opportunities as younger applicants.

If you are not given credit, or your application is denied, the creditor must provide you with the reasons why your application was rejected, either by notification, or by you asking the creditor within two months of being denied. A creditor must also give you a fair reason by law. The credit report system has been designed to make sure that creditors are as fair and objective as possible with those who are applying for financial assistance.

How To Improve Your Credit Score - credit score criterion can differ between creditors, but there are a few fundamentals that can be used to make sure that your credit is in good shape. These include things like:

-Paying your bills on time: Because your history is always taken into account when a credit score is determined, you can improve chances of acceptance by making sure that you have good statistics on paying bills and previous repayments.

-Evaluate your debts: Calculate your outstanding debts and compare them to your existing credit limits. If you are almost at capacity, consider reducing some of your debt before applying for more credit.

-What is your credit history: How long you have had a credit history is also important. If you haven’t had one for long, it can still work in your favor by having all of your payments made on time and low balances on your already existing credit.

-Have you made a lot of inquiries lately? This can have an effect on how your score is determined. Try to avoid applying for too many accounts, or lines of credit in a short time.

The best way to keep a good credit score, or start repairing your records, is to pay your bills on time and try to reduce some of the debt that you already have.

If you have damaged your credit score, it will take some time and perseverance, but, you will be able to repair your credit score as they are updated and subject to change over time with new information that is contained in your credit reports.



Viola

Mike Clover asked:


A credit inquiry is an item on your credit report that shows with permission a creditor requested your free credit score report.

Not all credit inquiries affect your credit score:

You may notice when you pull your credit report there are inquiries on there from a business you are not familiar with. The only inquiry that affects your credit score is the one where you are applying for credit. This is considered a hard pull on your report.

Inquiries that affect your credit score:

There is only one type of inquiry that affects your credit score. This type of inquiry is applications for a mortgage, auto loan and other credit, by you authorizing these creditors to access your credit report. This type of inquiry prompted by your own actions ends up on your personal credit report and affects your score.

An inquiry that does not affect your credit score: Checking your own personal credit report or any business that offers goods and services that requests your report. A business that you already have a account with that requests a check. A potential employer that does credit checks. Some of these types of inquiries might show up on your report but do not affect your credit score.

Checking your credit report does not affect your credit score:

Checking your credit report on a regular basis to ensure it is accurate and error free is recommended by Fair Isaac the inventor of the FICO Score. Maintaining a error free credit report is part of credit management which will improve your credit rating over time. Ordering your credit report at CreditScoreQuick.com does not hurt your credit score.

How credit inquiries are factored in your Credit Score:

There are five types of information used to calculate your credit score. Each category accounts towards a percentage of your score.

Payment History - 35%

Amounts Owed - 30%

Length of Credit History - 15%

Types of Credit in use - 10%

New Credit - 10%

Don’t let inquires scare you. There is nothing wrong with shopping for a better rate, or better terms on a loan. As you can see in the about chart, payment history is the biggest factor in calculation process of your credit score. The second biggest factor is how much of your approved credit limits are charged up. But of course you don’t want to go out and start applying for every credit offer out there either. Be responsible and have a good mix of credit, but stay away from too much credit as well You really on need 3 lines of credit reporting on your credit report.

Example:

1. credit card

2. car note

3. installment loan

This type of credit mix accounts for 10% of your score.



Edward

Lisa Nichols asked:


There are a number of tips that you can use right now to improve your credit score. A credit score is used by lenders, credit card companies and several other entities to gauge credit worthiness. Understanding how a credit score is calculated, using credit responsibly and utilizing a credit monitoring program are some of the things you can do to quickly improve your credit score.

Credit Score Tip: Understand Credit Score Calculations

Credit scores are calculated using a number of criteria. These include:

• Payment performance history; the number one credit score tip is to pay bills before they are due every month.

• The current level of debt affects a credit score and helps lenders and credit card companies determine the additional

amount of debt that can be tolerated.

• The length of credit history also impacts a credit history. In the old days, credit experts advised closing old accounts but now we’re told to keep accounts with solid payment histories open to improve credit scores.

• Multiple credit card and loan applications at one time may indicate some financial issues or problems and are factored into the credit score.

• Different types of accounts in a credit history can improve a credit score. Lenders like to see a mix of credit cards, loans and other lines of credit to see how effectively the debt is managed.

Credit Score Tip: Improve Credit Score with a Credit Monitoring Program

Credit scores improve with a credit monitoring program. Ordering a credit report with a credit score offers a starting point to understand how credit worthiness is determined by lenders and credit card companies. Experian’s Triple Advantage credit monitoring program provides a credit report, current credit score and tips on how to improve a credit score. When you order your credit report, verify that all information in your credit history is accurate. Errors in credit reports are not uncommon and it’s your responsibility to fix any mistakes. Credit report errors can be easily corrected by contacting the reporting credit bureaus. Credit monitoring programs will also immediately notify you about any suspicious activities on your credit report.



Adrian

Real Estate Advisor asked:


If you are thinking about buying a home, condo or any other type of real estate, then you should know how your credits score will impact the home buying process. Most people who buy real estate do not have enough money in the bank to purchase a property outright with cash. Instead, most of us need to get a loan (also referred to as a mortgage) from a bank or through a mortgage broker in order the purchase real estate.

The cost of a loan, is in part, linked to a person’s credit worthiness. In other words, lenders want to know the likelihood that a person will repay the entire loan on time and to completion. In the United States, a person’s credit worthiness is determined by their credit score, which is also known as a FICO score.

Credit scores are designed to measure the credit worthiness of a person and range from a low of 300 to a high of 850. The median FICO score in the U.S. is 723. Lenders use your credit score to estimate how much of a risk exposure they are undertaking by lending money to you. Based on your FICO score, and other factors such as income and debt, lenders determine whether you qualify for a loan or not, and if you do, what your interest rate and credit limit should be. If the loan applicant’s credit score is low, then banks and other lending institutions may refuse credit or charge higher interest rates.

Since borrowers with higher credit scores are less likely to default on a loan, lenders offer loans to them at a lower interest rate. So if you are a potential home buyer, then it would do you good to improve your credit score before buying a home or condo. Read on to learn more about how to get a copy of your credit report and steps you can take to improve your credit score.

Your credit score is determined and maintained by three separate credit reporting agencies. These are:

1.Equifax: http://www.equifax.com or (800) 685-1111

2.Trans Union: http://www.transunion.com or (800) 888-4213

3.Experian: http://www.experian.com or (888) 397-3742.

Not all credit granting institutions (such as credit card companies, mortgage companies, car loan companies) report to all three credit agencies. Therefore, it’s not uncommon for a person’s FICO score to differ from one agency to the next. For this reason, most home loan lenders take the middle score when determining your credit worthiness. Every consumer has a right to obtain a copy of his or her credit report. To do so, simply go to any of the sites noted above and request a credit report that provides data from all the agencies.

The credit agencies determine your FICO score using a complicated formula, where information is collected, weighted and aggregated for each of the five categories below.

1.Payment history - 35 percent

2.Total amount owned - 30 percent

3.Length of credit history - 15 percent

4.Type of credit used - 10 percent

5.New credit - 10 percent

Let’s take a look at how you can improve your status in each of these categories.

PAYMENT HISTORY

To improve your payment history,

1. Always pay your bills on time.

2. Change past-due bills into current and stay that way.

3. If there is a problem in paying on time, contact your creditors and work out a payment plan that will preclude them from reporting a late payment.

4. If in debt, contact a reputable credit counselor, to help you manage your finances responsibly.

TOTAL AMOUNT OWED

1. Keep your debt-to-credit ratio low by paying off debts. Don’t move it around.

2. If the credit card accounts you don’t use reflect a good credit history, keep them open as they build up your credit availability.

LENGTH OF CREDIT HISTORY

1. Your credit history can improve only over time. Avoid opening a lot of new credit accounts rapidly. It is wise to pay off older accounts that you do not use to build up a positive credit rating.

TYPES OF CREDIT USED

1. A mixture of account types such as credit cards, retail accounts, installment loans etc usually improves your credit score.

2. But don’t open new accounts just to have several accounts, apply only when you really need it.

MANAGING NEW CREDIT

1. Keep inquiries on your credit report at a minimum as they affect your credit score. Open as few new accounts as possible and ensure that you make only small purchases and pay on time.

FINAL THOUGHTS

It’s not uncommon for credit reports to have errors. For example, you may notice a charge on your credit report that you never authorized, or a charge that belongs to someone else. For these reasons, it’s a good idea to get a copy of your credit report every year, review it carefully for errors, and if you find mistakes, diligently follow the dispute resolution process.

Buying a home is a big lifetime decision and taking steps to improve your credit score before looking for a home will not only get you a better mortgage rate, but will also make your home buying experience a pleasurable one.



Julie

Tisha Kulak asked:


If you would have asked a financial expert that question about your credit score a year ago, you would likely have received a different answer than the one that is true today. What used to be considered a good credit score previous to our current economic conditions was 680 or above, but these days, if you want to get the best rates and have the best options when it comes to getting a loan or mortgage, you will likely need to have a FICO score of 720 or more.

Credit scores are compiled by Fair Issac, who are the creators of the FICO credit scoring system. Credit scores are based on 5 determining factors of your credit report.

* Your payment history

* The type of credit you have

* Your credit used to credit available amount

* The length of time you have established credit

* How much new credit you have acquired

Credit scores range from 350 - 850. Credit score categories are broken down in the following manner:

700 + - This will put you in the “very good” to “excellent” credit range. Those with these scores are likely to have no problems getting approved for loans and getting the best interest rates.

680 - 699 - With a score in this range will warrant your credit score in the “good” category. You will still get good rates with this type of score for mortgages or other loans.

620 - 679 - A score in this range means you have “fair” credit. When applying for loans with a score in this range, you may not get the pick of the litter and will likely have to provide a lot more documentation to prove your credit credibility.

580-619 - A score in this range is considered “not good”. While you may still qualify for loans, you will be paying higher interest rates if you apply for anything before working to improve your credit.

500-580 - If you have a score in this range, you will likely have difficulty being approved due to your “bad” credit score. Any loans you will get will come with very high interest rates. This category is also famous for attracting predatory lenders, who will be glad to give you credit but will also charge excessive fees and interest.

499 and lower - If you are in this category, your credit is considered “very bad”. While you still may find high interest loans, it will definitely be in your best interest to work on bettering your credit score before even applying for new lines of credit.

Improving your credit score is certainly something you can do on your own. It will take some patience and follow up. Request a copy of your free annual credit report and go over every entry with a fine-toothed comb. Report any inconsistencies to the credit bureaus and keep following up to see the improvements over time. Pay your bills on time and don’t max out your credit cards. Instead, start using cash and pay down your debts as fast as possible. All of these can help turn so-so credit ratings into excellent ratings.



Ruth