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.
As obvious as it seems, paying your bills on time is very important. Something as simple as one 30-day late payment can stay on your credit report for 7 years. A late mortgage payment can hold you back from obtaining a loan for a year or mean the difference between a great interest rate and a poor interest rate. Also weighted heavily are collections, charge-offs, judgments and bankruptcies. These types of issues generally affect your credit rating in the most negative way. It is certainly possible to have these issues corrected in time. The important thing is to become knowledgeable about your credit in order to correct these issues as well as prevent them from occurring in the future.
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.
Where Does It Come From? Now you are probably wondering "Where does my credit score come from?" This is a very common question and the answer is simple: Your credit score comes from your credit report.This credit report is created by the three major credit bureaus in the states and it contains the history of your payments, the amount of loans that you have, how much you owe, and a few other things.
The bureaus use the information contained in your credit report to calculate your score. The three major credit bureaus use the FICO scoring system, which ranges from 300 to 850.What Exactly is Your Credit Score Made Of? Your credit score is made of five different parts:Payment History (35%) Payment history refers to the ability to pay your bills on time. It represents 35% of your credit score. Your history is considered the best indicator of your future financial behavior. Late payments, missed payments, loan defaults, unpaid taxes, and the worst of all, bankruptcy, will all hurt your score.It's also important the amount of negative events and when these events happened. Newer events affects your score more than older ones. More severe events (like bankruptcy) are worse than less severe events. And many events hurt your score more than only a few of them.
Do not let your due date slip by.When you pay your bills on time or prior to the due date, you are establishing really good credit score standing. An additional advantage when you are paying in advance is that you are additionally making your balances low.Late payments will certainly not just provide lenders with a bad perception of you but it could contribute to a lower credit rating. To avoid late repayments, it is better to track due dates. Develop a monitoring system for due dates a week or two before your payment is due.
The one and most efficient ways of doing this is to peruse through your credit reports; these are detailed reports of your credit activity over the past year or years depending on the time. Look through it to see what lowered your credit score and work to improve it by not doing such things.Settle any outstanding debts,The report will tell you where you have debts and how much you owe whether credit card payday loans. This information will then help you to reduce these debts by paying them off or at least making arrangements on how to pay them if the debt is not within your ability. The fact that you have started on the payments is an improvement on your credit score.
Avoid credit cards,Warren buffet said that the first step to being rich is getting rid of your credit cards. A credit card is a permanent loan from the lending institution. Whenever you use it, you are charged interest therefore making your purchases convenient but expensive.There is no price tag that can be put on the harm the credit card does to your credit score and this story is true for everyone who has one. Credit cards promote impulse buying and misuse of money that increases your debt and lowers your credit rating. Get rid of your existing ones and cancel any new applications.Dedication carry's the day,Nothing good comes easy but improving your debts is something you should not take lightly. It is not going to be easy, it might call for a lifestyle shift, but just like education, the fruits will be sweet.
[Wealthy Men]
As obvious as it seems, paying your bills on time is very important. Something as simple as one 30-day late payment can stay on your credit report for 7 years. A late mortgage payment can hold you back from obtaining a loan for a year or mean the difference between a great interest rate and a poor interest rate. Also weighted heavily are collections, charge-offs, judgments and bankruptcies. These types of issues generally affect your credit rating in the most negative way. It is certainly possible to have these issues corrected in time. The important thing is to become knowledgeable about your credit in order to correct these issues as well as prevent them from occurring in the future.
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.
Where Does It Come From? Now you are probably wondering "Where does my credit score come from?" This is a very common question and the answer is simple: Your credit score comes from your credit report.This credit report is created by the three major credit bureaus in the states and it contains the history of your payments, the amount of loans that you have, how much you owe, and a few other things.
The bureaus use the information contained in your credit report to calculate your score. The three major credit bureaus use the FICO scoring system, which ranges from 300 to 850.What Exactly is Your Credit Score Made Of? Your credit score is made of five different parts:Payment History (35%) Payment history refers to the ability to pay your bills on time. It represents 35% of your credit score. Your history is considered the best indicator of your future financial behavior. Late payments, missed payments, loan defaults, unpaid taxes, and the worst of all, bankruptcy, will all hurt your score.It's also important the amount of negative events and when these events happened. Newer events affects your score more than older ones. More severe events (like bankruptcy) are worse than less severe events. And many events hurt your score more than only a few of them.
Do not let your due date slip by.When you pay your bills on time or prior to the due date, you are establishing really good credit score standing. An additional advantage when you are paying in advance is that you are additionally making your balances low.Late payments will certainly not just provide lenders with a bad perception of you but it could contribute to a lower credit rating. To avoid late repayments, it is better to track due dates. Develop a monitoring system for due dates a week or two before your payment is due.
The one and most efficient ways of doing this is to peruse through your credit reports; these are detailed reports of your credit activity over the past year or years depending on the time. Look through it to see what lowered your credit score and work to improve it by not doing such things.Settle any outstanding debts,The report will tell you where you have debts and how much you owe whether credit card payday loans. This information will then help you to reduce these debts by paying them off or at least making arrangements on how to pay them if the debt is not within your ability. The fact that you have started on the payments is an improvement on your credit score.
Avoid credit cards,Warren buffet said that the first step to being rich is getting rid of your credit cards. A credit card is a permanent loan from the lending institution. Whenever you use it, you are charged interest therefore making your purchases convenient but expensive.There is no price tag that can be put on the harm the credit card does to your credit score and this story is true for everyone who has one. Credit cards promote impulse buying and misuse of money that increases your debt and lowers your credit rating. Get rid of your existing ones and cancel any new applications.Dedication carry's the day,Nothing good comes easy but improving your debts is something you should not take lightly. It is not going to be easy, it might call for a lifestyle shift, but just like education, the fruits will be sweet.
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