If you ever want to refinance your home, buy a car or make a large purchase on credit you need to be concerned about FICO scores. The higher the FICO score the better chance you have of getting an excellent rate from the bank you will be using. Most people never pay attention to their FICO scores until they go to the bank to make a loan. This score is the first thing the creditor looks at before starting any paperwork on a loan. To get an excellent loan rate your score should be higher than 650. Anything over 700 is considered adequate and will usually work on getting you an excellent rate.
Payment history is reviewed to make sure that you don't have any late payments that are more than 30 days past the due date. If you do, and they're recent ones, then your score will drop. If you keep your payment history on time and pay when bills are due, then the number one category will be a major factor in your final score.The second category, available credit, is based upon a percentage of credit available to you compared to current loan balances. For example, if you have a credit card with a $10,000 credit limit and you have a $3,000 balance, you will be rewarded in your credit score. The algorithms seem to indicate that keeping an approximate balance of one-third of your available credit at all times boosts your score. However, if you approach, or worse go above, your credit limit, your scores will fall.
By concentrating on your payment history and available credit, you will have the most impact on your total score overall and you'll find that the remaining three variables will simply fall into place. Pay on time and keep your balances at the correct level is your best bet.When you apply for a loan in order to buy the house or car of your dreams lenders will look at your credit score and they will use it to decide if they should give you the loan or not.There are lots of Americans who don't know what a credit score is or how it is calculated. If you belong to this group of people, then don't worry because in this article you will learn all these basic concepts that are necessary to start improving yours and to buy the house or car of your dreams once and for all!
What Exactly is a Credit Score? A credit score is a number of 3 digits that lenders use as an indicator of your capacity to meet financial obligations such as mortgage payments, car payments, credit card bills, loan repayment, etc. It basically tells lenders how likely you are to pay your debts.It is usually a number between 300 and 850. The higher the credit score, the less risky you are to lenders. And the less risky you are to lenders, the better interest rates you will get. Also, the higher your credit score is, the more chances you have in getting a loan. Sounds simple right?
Remember, your payment history contributes to 35% of your credit score, and your balances contribute to 30% of your score. Therefore, maintaining low balances and paying your bills on time each month affects 65% of your credit score.Simply put, the longer your accounts have been opened, the higher your score will become. Accounts that are new may actually bring your score down, especially loans. It is not until you establish a positive history over time that you will notice the positive effects of a score increase.
Where Does It Come From? Now you are probably wondering "Where does my credit score come from?" This is a very common question and the answer is simple: Your credit score comes from your credit report.This credit report is created by the three major credit bureaus in the states and it contains the history of your payments, the amount of loans that you have, how much you owe, and a few other things.
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.
Important: Having different types of credits can help your score but don't go out and get loans if you don't need them. This isn't a significant part in the credit score formula (it only represents 10% of your credit score) so don't get yourself into more debt just to have a better mix of credit.How Can I Improve My Credit Score? Now that you know what a credit score is and where it comes from, the next thing you have to do is to start improving it as soon as possible. The truth is that it won't be an easy task (especially if you have a low one): it will take some time, money and patience but it will be worth it. A few more points could be the difference between buying the home or car that you and your family deserve or not!
[Wealthy Men]
Payment history is reviewed to make sure that you don't have any late payments that are more than 30 days past the due date. If you do, and they're recent ones, then your score will drop. If you keep your payment history on time and pay when bills are due, then the number one category will be a major factor in your final score.The second category, available credit, is based upon a percentage of credit available to you compared to current loan balances. For example, if you have a credit card with a $10,000 credit limit and you have a $3,000 balance, you will be rewarded in your credit score. The algorithms seem to indicate that keeping an approximate balance of one-third of your available credit at all times boosts your score. However, if you approach, or worse go above, your credit limit, your scores will fall.
By concentrating on your payment history and available credit, you will have the most impact on your total score overall and you'll find that the remaining three variables will simply fall into place. Pay on time and keep your balances at the correct level is your best bet.When you apply for a loan in order to buy the house or car of your dreams lenders will look at your credit score and they will use it to decide if they should give you the loan or not.There are lots of Americans who don't know what a credit score is or how it is calculated. If you belong to this group of people, then don't worry because in this article you will learn all these basic concepts that are necessary to start improving yours and to buy the house or car of your dreams once and for all!
What Exactly is a Credit Score? A credit score is a number of 3 digits that lenders use as an indicator of your capacity to meet financial obligations such as mortgage payments, car payments, credit card bills, loan repayment, etc. It basically tells lenders how likely you are to pay your debts.It is usually a number between 300 and 850. The higher the credit score, the less risky you are to lenders. And the less risky you are to lenders, the better interest rates you will get. Also, the higher your credit score is, the more chances you have in getting a loan. Sounds simple right?
Remember, your payment history contributes to 35% of your credit score, and your balances contribute to 30% of your score. Therefore, maintaining low balances and paying your bills on time each month affects 65% of your credit score.Simply put, the longer your accounts have been opened, the higher your score will become. Accounts that are new may actually bring your score down, especially loans. It is not until you establish a positive history over time that you will notice the positive effects of a score increase.
Where Does It Come From? Now you are probably wondering "Where does my credit score come from?" This is a very common question and the answer is simple: Your credit score comes from your credit report.This credit report is created by the three major credit bureaus in the states and it contains the history of your payments, the amount of loans that you have, how much you owe, and a few other things.
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.
Important: Having different types of credits can help your score but don't go out and get loans if you don't need them. This isn't a significant part in the credit score formula (it only represents 10% of your credit score) so don't get yourself into more debt just to have a better mix of credit.How Can I Improve My Credit Score? Now that you know what a credit score is and where it comes from, the next thing you have to do is to start improving it as soon as possible. The truth is that it won't be an easy task (especially if you have a low one): it will take some time, money and patience but it will be worth it. A few more points could be the difference between buying the home or car that you and your family deserve or not!
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