These are MUST READ principles to improve credit score rating and get out from those higher interest rates. Securing a lower interest rate can free up more money which means you can have more money to spend on the things most important to you! The banks don't need more money, YOU do! Learn here how you can become financially free.
What Determines Your Credit Score?
Your credit score is an industry standard three-digit score between 300 and 950. This score is used to determine the level of risk you represent to lenders when borrowing. There are several factors that go into creating your credit score rating. Within your credit file, parameters such as outstanding loans, the number of open credit card accounts and credit history are all determining factors that produce your personal credit score.
Prime, Sub-Prime, and Shafted Borrowers
Having a credit score above 680 will allow you to secure a good interest rate on your home mortgage loan, car loans or credit cards. This type is called a "Prime Borrower".
A credit score below 680 will put you at a "Sub-Prime Borrower" status and you will be paying on a higher interest rate for your loans.
Below a 560 credit score is what most lenders call a "Shafted" score. You do not want to be here. Most lenders will not lend to you including home loans and car loans. If you are able to retrieve a credit card, you will most likely be paying at much higher interest rates, up to 23%!
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How is Your Credit Score Calculated?
You can obtain your credit score from any of the major credit bureaus. Each of the bureaus calculate your FICO score somewhat differently. Your FICO score is then adapted with each bureau and given its own name such as 'Beacon', 'Empirica' and 'Experian/Fair Isaac'. When you do request your credit score rating, it may change with each request as the bureau data changes. Lenders evaluate other categories of information including your income as well as the type of credit you're applying for when determining to extend you credit.
Five Factors That Can Affect Your Credit Score:
Past Credit Performance (35%) - Make sure to pay your bills on time. This is most critical!
Incurred Debt (30%) - Lenders won't neccessarily lend to you if you are already over your head with too many debts.
Longer Credit History (15%) - Having a longer credit history is best. If you're starting out, open an account and wait.
Pursuing New Credit (10%) - When your credit is run, an inquiry is created on your report. Keep those inquiries low.
Types of Credit (10%) - Try to apply to a mix of several types of credit, credit cards, retail accounts and a mortgage if possible. A healthy variation of credit can improve credit score rating.
Follow these simple principles outlined above to improve credit score. If this website was helpful, please Bookmark Me.
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