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Credit scores are
used by various companies, such as utilities,
insurers, mortgage companies, employers, creditors
and several others to decide if they want you as a
customer, an employee or a tenant. Credit scores
measure risk. It is extremely important information,
therefore, you should know what your credit score is
and what it means.
According to a new survey of adult Americans
conducted by the Opinion Research Corporation
International for CFA and Providian Financial, the
majority of consumers do not understand what credit
scores measure, what is a good or bad score or how
scores can be improved.
The truth is, credit scores will save or cost you
money if you do not take the time to learn about how
they affect your everyday life. Just because a
credit bureau gives you a credit score that does not
mean you cannot improve it or make modifications. It
is in your best interest to have the highest credit
score possible.
There are three credit bureaus,
Equifax, Experian, and TransUnion. Each of these
credit bureaus computes a person’s credit score
slightly differently and they usually differ a few
credit points between credit bureaus.
Here is an example of how a credit score can save or
cost you money. On a $150,000, 30-year, fixed-rate
mortgage, a person with credit scores of more than
720 might be charged a 5.72 percent rate with
monthly payments of $872. However, a person with
credit scores less than 560 could pay 9.29 percent
with monthly payments of $1,238. Those valuable
credit score points would cost a difference of
$4,392 per year.
A credit score of less than 600 usually results in
credit denial or a higher sub prime interest rate.
Whereas, credit scores of more than 700 usually
qualify a person for the lower interest rates.
Persons with a score of 760 or more usually get the
lowest interest rates. See image below for
national average credit scores.
Improving your credit score in some cases may be
easy in some cases and in others it may take years
to improve your score. If you think you can raise
your credit score by marrying someone with a higher
score, think again.
Listed below are a few ways to help raise your
credit score.
1. Pay off large credit card balances.
2. Never use a credit
card to the full credit line.
3. Paying your bills
on time, consistently.
4. Do not apply for
more credit cards or lines of credit.
5. Do not move debt
from one card to another consistently.
6. Check your credit
report every six months, sooner if you find they
have made an error and you want to make sure they
correct the error.
7. It costs
approximately $9 per to obtain your complete credit
report from each the three main credit bureaus. This
will be the best money you ever spend.
8. If possible, never
pay just the minimum due on a credit card payment,
try to pay at least 10% more than the minimum
monthly payment requested.
9. When you receive
your credit report from each of the credit bureaus
check it thoroughly. Often other persons with your
same name may have derogatory information and it is
placed on your credit report by accident. If you
find this to be the case, contact each of the three
credit bureaus and explain who you are, your social
security number, address and explain why the
improperly placed information should be removed from
your credit report.
10. If you have
bad credit, start a new leaf today and follow the
rules above. Credit Reports and Credit Scores take
time to improve and it is best to start today.
Over time, derogatory items will drop off your
credit report and as long as you are not adding
more, time can be in your favor.
The median FICO score in the U.S. is 723
The average FICO score in the U.S. is 678
Please Note: The national average credit score
is 678 and a good credit score is
700 and above. An amazing 58% of
Americans have credit scores above 700. The
national average is only 678 because the average is
being pulled down by some very low credit scores.
Remember, we are not talking about the median score
(half above and half below), we're talking about an
average score. |
