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What is a Good Credit Score

“You might have asked yourself, over and over, what is a good credit score? Let us help you answer that question. Read more now!”

Determining What is a Good Credit Score

When it comes to your credit, it’s important to know how you stack up. Do you have good credit? Excellent credit? Poor credit? How can you find out? In most cases, the easiest way to determine the health of your credit is to look at your credit score, a numerical value that reflects a mathematical analysis of your debt, your payment history, the existence of liens or other judgments, and other statistical data collected by the credit bureaus. In other words, your credit score is the compact, simplified version of your entire credit history, all rolled up into one tidy three-digit number.

Why Do You Need Good Credit?
The importance of having good credit can’t be understated. From helping you get a loan, to qualifying you for a great job, good credit simply makes life easier and less expensive.

In the eyes of lenders, employers, insurance agents, and a host of other people and entities, your credit score represents how responsible and even how ethical you are. For example, lenders look at your credit score to determine not only your ability, but your willingness to repay a loan. Insurance companies view an individual with a good credit score as someone who is trustworthy and less likely to commit insurance fraud. Employers look at credit scores as a way to determine whether a candidate will be a dependable new employee.

A bad score, however, can prevent you from being able to purchase a home, work in certain industries, and will wind up costing you a bundle in higher interest rates and fees. However, if you understand what hurts your credit score, you can make an effort to fix bad habits and improve your credit rating.

The Three Major Credit Agencies
Experian, Equifax, and TransUnion
There are three major credit agencies that provide consumer credit information (including credit scores) to the majority of interested parties: Equifax, Experian, and Transunion. Each reporting agency collects information about your credit history from a variety of sources, including lenders, landlords, and employers, as well as other sources. These includes public records, current and past loans, your payment history, and other data. They then rate your performance using a proprietary scoring system to come up with a credit score.

Because each agency may access different information and has its own formula for calculating your creditworthiness, it is not uncommon for someone to have three different credit scores.

Understanding Credit Scores
Your credit score is a three-digit number that, without context, may mean very little to you. Here is a breakdown of how lenders, insurance agencies, and employers all view your credit score:

Excellent Credit: Credit Score Above 800
If your credit score is above 800, you have an exceptionally long credit history that is unmarred by things such as late payments, collections accounts, liens, judgments, or bankruptcies. Not only do you have multiple established lines of credit, but you have or have had experience with several different types of credit, including installment loans and revolving lines of credit. You generally have a stable work history, usually with one company. More at What Is a Good Credit Score – Understanding Credit Ratings & Ranges

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A Guide to Credit Score Scale

“Where you fall on the credit score scale is important. Let this guide help you. Check it out now!”

All About Credit Score Scale

Our financial lives are dictated with terms such as credit score, credit ratings, credit history and so on. These are the terms which often crop up when you are applying for loans or credit cards. No money lender or a finance institution approves a loan without reviewing the applicant’s credit scores and credit history. Although, most people have a vague idea regarding what are credit scores, most of them are unaware about the credit score scale.

Credit Score Scale Guide
Credit score is a statistical technique of determining the probability of an individual repaying his debt within a specific period of time, by evaluating and analyzing his previous credit history. In short, it is your creditworthiness represented by a number. The evaluation and analyzing work is done by three credit bureaus namely, TransUnion, Experian and Equifax. These bureaus have their own parameters and mathematical formulas for deriving a person’s credit score. The software program that uses the mathematical formulas to find credit score is devised by Fair Isaac Corporation (FICO), hence the score is also called FICO score. The scores derived by each of these bureaus may vary slightly, owing to the differences in the information in their databases.

Typically, following parameters are taken into consideration while deriving a person’s credit score. A fixed weightage is assigned to each of these parameters, which is as follows:
Payment history (35%)
Outstanding current debts (30%)
Length of credit history (15%)
Types of credit accounts owned (10%)
New credit applications (10%)
Credit Score Scale Chart

The FICO scores are expressed in a numerical range of 300 to 850.

Excellent
The credit scores between 760 to 849 are considered as least risky with a very high creditworthiness. The credit score of 850, which is an ideal credit score is the highest score possible in this range. People with excellent credit scores are entitled to fastest approvals and enjoy lowest possible interest rates.

Great
The next best category is ‘great’ with credit scores in the range of 700 to 759. People in this credit score range also enjoy almost all the privileges as those with excellent ratings.

Good
Good credit score range is a category in which most Americans falls. Credit score range of 660 to 699 is not a problem while seeking loan approvals. However, you may not get the best possible interest rates, enjoyed by the above two classes.

Fair
Credit score range of 620 to 659 is considered as low to medium risk. Although getting loans may not be an issue, getting them at affordable interest rates certainly is. People with fair or average credit scores should look for ways to improve credit scores so that they too can enjoy good interest rates.

Poor
You may have to run from pillar to post to obtain a loan, as money lenders regard poor or bad credit scores as high risk. Even if you manage to obtain a loan, you will have a tough time keeping up with the payments, owing to very high interest rates.

Very Poor
People who have very poor credit scores below 580 should consider credit repair before they approach a loan institution. Consistent efforts towards credit improvement may eventually help you attain a better credit score range. More at Credit Score Scale Guide

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Credit Score Range: Understanding the Different Credit Score Ranges

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Different Credit Score Ranges

Your credit score is important. Very important. That three-digit figure is so influential that it determines your eligibility for credit cards, home and auto loans, student loans, apartment rentals and even some jobs. It’s vital to know your credit score range so you can decide which loans to apply for, know when you’re settling for less than you could get and, if necessary, take steps to rehabilitate your FICO score. Your credit score gives lenders an idea of whether they can rely on you to pay back your debts. It follows that your credit history, past and present, is among the data that credit bureaus use to calculate your score. If you’d like to get a grip on your score’s implications, read on: the nerds will clarify the finer points.

Lower score, higher interest
More than determining your eligibility for a loan, your score affects the cost to you, too. In fact, the score and the interest you pay are inversely proportional, roughly at a one-to-one ratio. So, as you boost your score, your monthly payments will generally decrease at the same rate. Let’s say you want to get some new wheels. To finance your slick new ride, you take out a 60-month fixed-rate auto loan of $15,000. If your score is in the gutter, say a 610, you’d pay $357 a month, according to myFICO.com. The guy next to you in the lot, with the Ray Bans on, has a superb score of 800. His score is about 30% better than yours—31.15% better, to be precise—as his monthly payment, at just $277, a 28.88% markdown. It’s clear that you’d rather be that other guy, who pays on time and keeps his debts low. Because once you start digging yourself a hole with late payments, it becomes harder to climb out, with the high rates weighing you down.

Understand your FICO score
The breakdown of credit score ranges is as follows:

630: Bad credit
You likely landed her because of bankruptcy, or because you’ve missed payments consistently—or, as is often the case with younger folks, you have no credit history at all. You’ll face higher interest rates and fees, and your choice of credit card is restricted. If you find yourself in this bracket and still want a credit card, a secured card is likely your best bet.

630-689: Fair (average) credit
Your score is average, and it’s probably because you have too much “bad” debt. If you’re holding onto some credit card debt or if your balance often grazes your credit limit, bureaus won’t trust you, and therefore lenders won’t either.

690-719: Good credit
Your rates are low, and you can choose from most cards, including those that earn rewards.

720-850: Excellent
If you’re in this bracket, take a look at cards with great fringe benefits. American Express, for example, offers premium cards that better accommodate the ritzy life.

Although these four categories are the standard, credit scores are still somewhat fluid, especially since the recession began. Since 2007, scores’ effect on consumers has become more severe, too, according to Paul Oster, the CEO of Better Qualified, LLC, which specializes in business and consumer credit services. “The impact of scores has changed dramatically,” Oster wrote in an e-mail. “Consumer’s credit scores can cost or save them hundreds of dollars a month. The ‘magic number’ has been increasing since the ‘R’ [the recession]. I know that 5 years ago 620 was a good benchmark, then it went to 640, 680, 720, and now 740. The average credit score is around a 685. Remember that scores are fluid and changing all the time. Studies show that individuals with an average credit score would reduce card finance charges by $76 annually if they raised their score by 30 points.” More at What are the Different Credit Score Ranges? Bad to Excellent and Everything In Between

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