Tag Archives for " Finance "

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

You can watch this video for more on Credit Score Scale:

More Reading for Credit Score Scale here:

Credit Score Range: Understanding the Different Credit Score Ranges

“Want to know more about credit score range and wondering what the different credit score ranges are? Let us help. Read more now!”

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

Check out this video for more additional info on Credit Score Range:

More Reading for Credit Score Range here:

Budgeting for Dummies – Learn These Essential Steps to Help You Manage Your Finances

“This article will discuss essential steps and tips on how you can manage your finances better. Budgeting for dummies you say? Read on and find out!”

 

budgeting for dummies

Learn and Be an Expert in Managing Your Finance

Learning how to budget is essential to becoming financially healthy. Many people are intimidated by budgeting simply because they have never learned how to budget. Budgeting is simple. It’s a process where you write down what you make each month, what you spend each month and what’s leftover (or overspent) each month.

The whole goal of a budget is to tell your money where to go each month. If you haven’t been budgeting or just simply don’t know how to budget yet, you finances are likely getting out of hand. There is hope in learning how to budget your money. Let’s dig in to the five steps of learning how to budget:

  1. How to Budget, Step 1 – Track Your Income
  2. How to Budget, Step 2 – Track Your Expenses
  3. How to Budget, Step 3 – Estimate How Much You Will Spend in the Next Month in Each Budget Category
  4. How to Budget, Step 4 – Give Your New Budget a Try For a Month
  5. How to Budget, Step 5 – Keep Working at it and You’ll See a Difference

How to Budget, Step 1 – Track Your Income

Yes, you will need to track everything. Do you know how much you make each month? No is not an acceptable answer. Get out those pay stubs, log into your company’s online pay stub system or just look at your bank statement. Note: If you’re income is irregular, you should do additional research on how to budget with an irregular income. There are some great articles out there. For those of you who get regular paychecks, make sure to get your numbers and do the basic calculations on what your income is each month. Once you have your income number totaled, write it down at the top of a blank sheet of paper.

How to Budget, Step 2 – Track Your Expenses

This is the hardest part of budgeting. Learning how to budget won’t do you any good if you’re not tracking your expenses. It’s important to track everything you spend each month because then you can make educated guesses on how much you think you’ll spend each month. The goal of making a budget is to to learn how to estimate your expenses and allocate a specific amount of money each month to certain categories.

A typical budget is broken down by categories of expenses. Some common categories of expenses are:

  • Mortgage and Rent
  • Bills & Utilities
  • Loans and Payments
  • Shopping (clothing, gifts, toys)
  • Giving (church donations, non-profits)
  • Cable TV
  • Cell Phone
  • Internet
  • Gasoline
  • Insurance

To successfully learn how to budget, you’ll need to get a feel for how to categorize your expenses. Mint.combudgeting for dummies does a great job of breaking your expenses into categories, In fact, Mint.combudgeting for dummies has a budgeting tool set which can greatly speed up the process of learning how to budget and get your first budget going. I would highly recommend getting started budgeting with Mint.combudgeting for dummies.

If you decide not to use an electronic system to learn how to budget, an old fashion paper and pencil will definitely do the trick. Write down your budget categories, which are categorized expense types, down below your income on your piece of paper. There could be anywhere from 10 to 50 budget categories. Try to lump them into around 15 or 20 categories as this will make it simpler in figuring out how to budget.

How to Budget, Step 3 – Estimate How Much You Will Spend in the Next Month in Each Budget Category

Once you have your categories decided upon. Try to estimate how much you will spend during the next month in each category. If you haven’t been tracking your expenses up until this point, you’ll likely be WAY off, but that’s okay. If you have been tracking, you may still want to estimate higher than you initially think for each category. When I was first learning how to budget, I tried cutting down many of my category allocations because I thought, “Oh, I don’t need to spend all that”, but I was wrong. Just allocate a number that you regularly spend. Don’t try to short change yourself and make it hard on you to hit the numbers. Budgeting should be a real number, not a fake one that’s too low to realistically hit.

How to Budget, Step 4 – Give Your New Budget a Try For a Month

During and after the first month of learning how to budget, you will likely get frustrated. You likely won’t stay below your estimates. We usually spend way more than we think we do. We just never have tracked how much all that eating out costs us each month. So, if you’re shocked on how much you spend in some categories after learning how to budget, don’t worry. It will take a few months to get this stuff right. For the next couple of months, try tweaking your budget in the direction of over or underspending and see how that goes.

How to Budget, Step 5 – Keep Working at it and You’ll See a Difference

Budgeting is hard at first when you’re first getting started, but after you learn how to budget effectively, it can start getting fun. The results of telling your money where to go each month and being in control of your spending can be huge. I learned how to budget only a couple of years ago and have since gotten out of debt, built an emergency fund of 6 month of living expenses and have saved a significant amount of money that I plan to use either toward a home purchase or toward an investment portfolio over the next few years. I’m definitely glad I took the time to learn how to budget and hope you will too….More at Budgeting for DummiesHow To Make A Budget- A Budgeting for Dummies Article Solution

More Reading on Budgeting for Dummies: