FICO scores, the credit scores lenders use to evaluate a loan application contain a complex set of algorithms to arrive at their mythical number. Anything above 740 can be considered excellent credit while scores below 620 can be low enough to deny someone a mortgage. What is the best way to keep credit scores high? FICO scores use five main ingredients when composing a score, with different weight being placed upon the different categories. Those categories are:Payment History,Available Credit,Length of Credit,New Credit/Inquiries,Types of Credit,While no one but the folks at FICO know exactly how these five categories interact with each other to produce a score, we do know that Payment History and Available Credit amount to nearly two-thirds, 65 percent to be exact, of the calculation of a score.
Credit scores are counted by the following method:35% for payment History: Have you paid your bills in the last 30 days and do you have any late payments,30% for Amounts owed: If you have credit cards, equity loans, or lender loans, how much of the loan amount do you owe or on a credit line how much have you used up. If you possess five credit cards with a $5000 maximum line of credit and owe $5000 on each card, this will result in a much lower credit score.15% for Length of Credit History: The longer period that the bank can measure your credit, the better for your credit score. The banks want to see that you pay your bills.
10% for New Credit: If you are constantly opening new credit lines with department stores, this will lower your credit score. These credit cards have low limits and when you use the maximum amount of credit it will make large decreases in your credit score.10% for the type of credit you have: Credit with high risk lenders, loan sharks, and possess many credit cards, will have a lowering effect on your credit score.
The things that damage your credit score the most are late payments, collections, Bankruptcies, foreclosures, tax liens and judgments. If you have any of these types of credit accounts you will see credit scores in the low 500's and not sufficient to receive a loan from current lenders.It make good sense, if you have a lot of high interest loans, high loan to value credit cards and collections, to refinance your home or take out an equity line and pay off these small loans. This action can raise your FICO score dramatically and make it possible to get approval from a bank for a better loan rate.
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.
A healthy mix of different accounts is best. You want your credit report to be comprised of credit cards, mortgages and auto loans. You don't simply want to have credit cards listed on your credit report.When a company pulls your credit report to qualify you for credit, this is called an inquiry. An inquiry will stay on your credit report generally for 3 years. It is very important to limit the amount of inquiries on your credit report. Although inquiries only contribute to 10% of your credit score, too many inquiries in a short period of time makes a consumer appear to be out of money and desperate for credit, and this becomes a risk in the eyes of potential creditors. It also implies to creditors that you may be opening new accounts, which as stated above pushes your credit score down.
Look for support from professionals.Don't be enticed by every attractive offer by lenders. It is better to speak to a specialist prior to accepting an agreement without thoroughly investigating the fine print.Financial experts can assist you in effectively handling your financial resources. They can be your source of help and support on concerns regarding your credit scores. They can probably advise you on the benefits and drawbacks of pulling your own credit report and the many demands lenders require before they arrive at a credit decision.
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.
Consolidate.Debt consolidation is usually for individuals that experience difficulty paying off debts to their lending institutions. Consolidation is recommended for such people to unburden them of stress in making many different monthly payments to several different lenders.Examine and re-evaluate.Be your own financial counselor. Do not let financial problems pile up. Rather than awaiting credit rating reports to be mailed to your front door, make your own assessment. By doing this, you are updated concerning your credit reports.
Self-evaluation of your credit report will help you evaluate what kind of credit ratings you still have. Nowadays, if you want a complimentary copy of your credit report, you could easily go online and find one. Some even offer a free trial service.Learn How to Improve Your Credit Score,Your FICO score can establish just how excellent or bad your credit rating is in addition to the national average rating. Learn how to improve and maintain your credit score. Monitor and keep track of your credit score on your own. You will not only learn how to preserve an excellent credit score and rating, but aid your nation in maintaining a good average credit rating and help in stabilizing the economy.
[Wealthy Men]
Credit scores are counted by the following method:35% for payment History: Have you paid your bills in the last 30 days and do you have any late payments,30% for Amounts owed: If you have credit cards, equity loans, or lender loans, how much of the loan amount do you owe or on a credit line how much have you used up. If you possess five credit cards with a $5000 maximum line of credit and owe $5000 on each card, this will result in a much lower credit score.15% for Length of Credit History: The longer period that the bank can measure your credit, the better for your credit score. The banks want to see that you pay your bills.
10% for New Credit: If you are constantly opening new credit lines with department stores, this will lower your credit score. These credit cards have low limits and when you use the maximum amount of credit it will make large decreases in your credit score.10% for the type of credit you have: Credit with high risk lenders, loan sharks, and possess many credit cards, will have a lowering effect on your credit score.
The things that damage your credit score the most are late payments, collections, Bankruptcies, foreclosures, tax liens and judgments. If you have any of these types of credit accounts you will see credit scores in the low 500's and not sufficient to receive a loan from current lenders.It make good sense, if you have a lot of high interest loans, high loan to value credit cards and collections, to refinance your home or take out an equity line and pay off these small loans. This action can raise your FICO score dramatically and make it possible to get approval from a bank for a better loan rate.
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.
A healthy mix of different accounts is best. You want your credit report to be comprised of credit cards, mortgages and auto loans. You don't simply want to have credit cards listed on your credit report.When a company pulls your credit report to qualify you for credit, this is called an inquiry. An inquiry will stay on your credit report generally for 3 years. It is very important to limit the amount of inquiries on your credit report. Although inquiries only contribute to 10% of your credit score, too many inquiries in a short period of time makes a consumer appear to be out of money and desperate for credit, and this becomes a risk in the eyes of potential creditors. It also implies to creditors that you may be opening new accounts, which as stated above pushes your credit score down.
Look for support from professionals.Don't be enticed by every attractive offer by lenders. It is better to speak to a specialist prior to accepting an agreement without thoroughly investigating the fine print.Financial experts can assist you in effectively handling your financial resources. They can be your source of help and support on concerns regarding your credit scores. They can probably advise you on the benefits and drawbacks of pulling your own credit report and the many demands lenders require before they arrive at a credit decision.
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.
Consolidate.Debt consolidation is usually for individuals that experience difficulty paying off debts to their lending institutions. Consolidation is recommended for such people to unburden them of stress in making many different monthly payments to several different lenders.Examine and re-evaluate.Be your own financial counselor. Do not let financial problems pile up. Rather than awaiting credit rating reports to be mailed to your front door, make your own assessment. By doing this, you are updated concerning your credit reports.
Self-evaluation of your credit report will help you evaluate what kind of credit ratings you still have. Nowadays, if you want a complimentary copy of your credit report, you could easily go online and find one. Some even offer a free trial service.Learn How to Improve Your Credit Score,Your FICO score can establish just how excellent or bad your credit rating is in addition to the national average rating. Learn how to improve and maintain your credit score. Monitor and keep track of your credit score on your own. You will not only learn how to preserve an excellent credit score and rating, but aid your nation in maintaining a good average credit rating and help in stabilizing the economy.
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