Understanding what goes into a credit score and how to raise it is extremely important in this day and age. For one, there\’s almost nothing that can be bought on an extended payment plan without a credit report — and its score — being pulled by a potential lender. And keep in mind that a \”low\” score (anywhere from less than 600 out of 850) means higher interest rates, at the least.
The generic term \”score\” usually refers to a number given to reflect a person\’s creditworthiness based on past credit history, which is usually a 7 to 10 year in-depth history of a person\’s borrowing habits. The Fair Isaac Credit Organization (FICO) is one of the most common arbiters of credit scoring, and all 3 credit bureaus (Experian, TransUnion, Equifax) have their own scores, which go up to 850.
Never forget that a \”low\” score (usually, 600 or below is considered a low score nowadays, though some bureaus now consider 650 to be low) can end up costing a person looking for consumer credit or a home or auto loan a great deal in terms of it being more expensive to borrow that money. And employers are beginning to look increasingly at a score and credit history in terms of hiring decisions.
A big reason for why employers are starting to look at a credit history and its score is that they\’re coming to the conclusion that a person\’s credit behaviors may provide a look at how that person would behave as an employee. This particular belief is being hotly disputed by a number of HR experts, and the law requires an employer to obtain permission prior to accessing a credit history.
Also, it\’s becoming more difficult to obtain a mortgage these days with a low score. In fact, those with such scores might not be able to get a loan at all without a significant down payment. And even auto insurers are getting in on the act and are pulling credit reports before extending indemnity coverage, though more than a few states are starting to outlaw that practice.
The things to do to raise a credit score are fairly common sense and revolve around paying things on time. FICO has recently released information that allows people to see how it goes about formulating a score and it confirms the need to avoid bankruptcy or home foreclosure if at all possible. Both those actions can lower scores by about 200 points. A late credit card payment can drop a score 10 points, at minimum.
Keep in mind that credit cards that are maxed out or near their upper limits can drop a credit score by up to 50 points. It can also be raised gradually by paying down amounts owed (improving the debt-to-earnings ratio) and by making payments on credit cards that are a little bit more than the minimum payment needed. Individual credit is an individual\’s responsibility, and never forget that.
To get additional tips about how to improve credit score and to learn how you can benefit from credit repair, visit these links. The best answers are to be found here.
Related posts:
