Jan
23
One of the first things you need to do before undergoing credit report repairing is to take time to understand how credit scoring works. This article will explain what a credit score is, so that you will know what to look for when you start to fix bad credit items that show up on your report.
What is a Credit Score (aka FICO Score)?
The credit score that lenders use is called a FICO® score. Your FICO score helps those you approach to borrow money determine whether you qualify for a loan and what interest rate you’ll pay. It is a number based on the information in your credit file that shows how likely you are to pay a loan back on time.
The Highs and Lows of a Credit Score
Credit scores range from a low of 300 or 400 to a high of 800 or 900, depending on the source cited. The higher your score, the better. This means you will get lower interest rates on everything from home and auto loans to credit cards. Alternately, the lower your score, the higher the interest rate.
Credit Repair: Why It Pays to Fix Bad Credit
Bad credit costs. How? Consider this: Roughly, a score of 620 is necessary to qualify for a prime loan at conventional rates. Consumers with lower scores will be charged a higher interest rate, or denied altogether.
Falling below the 620 cut-off point can impose significant costs on mortgage borrowers. Over the life of a 30-year, $150,000 mortgage for example, a borrower paying a sub-prime rate of 9.84%, instead of a prime rate of 6.56%, would pay $317,517 in interest instead of $193,450 – a difference of $124,067 in interest payments over the life of the loan. As this example illustrates, it literally pays to clean up your credit.
Credit Repair Tips: Factors that Determine Your FICO Score
There are several factors that go into determining your FICO store. Following are four of the most important (there are several more):
On-Time Payments: How many times you’ve had late payments. FYI, this is the number one thing you can do to increase your credit score – make your payments on time.
Length of Credit History: The longer you have open credit accounts, the higher your score (if you’ve paid on time and if the accounts are of a certain kind).
Types of Credit Lines: As alluded to above, some types of credit can actually work against you.
Credit Available to You: Having too much credit available to you – even if you don’t use it – can lower your score. Note: It’s tidbits like this that most don’t know when trying to repair their credit that can have you going about it the wrong way.
Repair Your Credit and Have the Life You Deserve
The good news is that you can repair your credit and get on the road to having the life you dream of, eg, starting a business, buying a home, upgrading to a nicer car, etc.
By: Yuwanda Black
What is a Credit Score (aka FICO Score)?
The credit score that lenders use is called a FICO® score. Your FICO score helps those you approach to borrow money determine whether you qualify for a loan and what interest rate you’ll pay. It is a number based on the information in your credit file that shows how likely you are to pay a loan back on time.
The Highs and Lows of a Credit Score
Credit scores range from a low of 300 or 400 to a high of 800 or 900, depending on the source cited. The higher your score, the better. This means you will get lower interest rates on everything from home and auto loans to credit cards. Alternately, the lower your score, the higher the interest rate.
Credit Repair: Why It Pays to Fix Bad Credit
Bad credit costs. How? Consider this: Roughly, a score of 620 is necessary to qualify for a prime loan at conventional rates. Consumers with lower scores will be charged a higher interest rate, or denied altogether.
Falling below the 620 cut-off point can impose significant costs on mortgage borrowers. Over the life of a 30-year, $150,000 mortgage for example, a borrower paying a sub-prime rate of 9.84%, instead of a prime rate of 6.56%, would pay $317,517 in interest instead of $193,450 – a difference of $124,067 in interest payments over the life of the loan. As this example illustrates, it literally pays to clean up your credit.
Credit Repair Tips: Factors that Determine Your FICO Score
There are several factors that go into determining your FICO store. Following are four of the most important (there are several more):
On-Time Payments: How many times you’ve had late payments. FYI, this is the number one thing you can do to increase your credit score – make your payments on time.
Length of Credit History: The longer you have open credit accounts, the higher your score (if you’ve paid on time and if the accounts are of a certain kind).
Types of Credit Lines: As alluded to above, some types of credit can actually work against you.
Credit Available to You: Having too much credit available to you – even if you don’t use it – can lower your score. Note: It’s tidbits like this that most don’t know when trying to repair their credit that can have you going about it the wrong way.
Repair Your Credit and Have the Life You Deserve
The good news is that you can repair your credit and get on the road to having the life you dream of, eg, starting a business, buying a home, upgrading to a nicer car, etc.
By: Yuwanda Black
Comments
Leave a Reply