Wednesday, June 5, 2013

How To Raise Your Credit Score And Enjoy Low Interest Rates

Raising your credit score can be a daunting task if you do not have a clear idea of what actually impacts your score. The first step to take is to understand the FICO scoring model, which tells you what kind of importance is given to each attribute of your credit report. As per the FICO scoring model, paying bills on time is one of the most important factors. 35% of weightage is given to this factor.
That said, paying your bills on time itself may not to catapult your score to the next level. There are several other parameters on which your score can be calculated. Your current debt is another important factor that determines your score as 30% weightage is given to it.
If you are able to maintain a low current debt and are able to pay your bills on time, your credit score should ideally be in a risk free zone. However, its important to monitor your credit on a monthly basis as a couple of late payment and an extra credit cards can bring down your score rapidly.
Its also a great idea not to indulge in new credit applications as this is one of the factors used in the calculation of your FICO score. 10% of weightage is given to new credit applications while your score is being determined. If you already have considerable current debt, its advisable not to apply for any new credit applications.
When it comes to credit cards, its best to use select credit cards on a consistent basis, preferably the ones that have a high credit limit. This way, it's easy to remember your billing dates and you will not have to pay off several different credit cards every month. At most, its good to use 2 to 3 credit cards. If you already have too many cards try and pay off these cards and close those accounts. This should assist you in increasing your points.
Another great thing to do is to register with companies that can provide regular credit alerts. These services can be of great assistance as they can instantly tell you your credit score from all three credit agencies and help you monitor and manage your credit efficiently. However, one must always be aware that there could be fraudulent companies out there trying to take all your information and stealing your identity by claiming that they can provide you a free score. Usually, most legitimate companies charge money and provide a free trial so that we can assess their service before deciding to pay them. Such services are rare and not so easy to find. Thorough research is required before registering with any such companies.
Hopefully, this information should give you some useful tips on how you can raise your credit score. Increasing your credit score will ensure that you get all your future loans at extremely low interest rate, which is a great benefit. Therefore, it makes perfect sense to invest in services that can help you monitor your score consistently.

Saturday, June 1, 2013

Credit Score Ratings

 Credit score ratings are a numerological representation of your ability to use credit wisely. In short, when you borrow money, use a credit card, apply for a loan, or make payments on those debts, you are creating a credit history. There are three credit bureaus who gather information reported from your creditors (those who you do business with such as credit card companies and other lenders) and keep a file on you.
All of the information about your credit use, including your personally identifiable information is managed by these bureaus. When another creditor wants to loan to you, it will request a copy of this report. The goal is to learn as much as possible about what type of borrower you are. Do you make payments on time? Do you use all of your available limit? Do you make payments to reduce how much debt you have or are you applying for new debt.
Why It Matters
Credit score ratings matter. If your score is low, this means you are a high risk to lenders. Many lenders turn down borrowers who are have a very low credit score. If you are given a loan with a low score, you will pay for it with a very high interest rate. Even more importantly, some employers use this information to determine if you should be hired. Keep your score as high as possible is critical.
How to Monitor Your Score
To monitor your credit score ratings, the first step is to check your credit report with each of the three bureaus. You can do this one time per 12 months free of charge. However, it does not include your actual score. It will only allow you to verify that the information contained within your file is up to date and accurate. It is up to you, then, to ensure that you make wise credit decisions so your score can increase.
Additionally, you can purchase a credit monitoring service. This type of service allows you to pay a small fee each month that will allow you to know what your score is. If there is a change to it, it will tell you that there is a change. You can monitor any changes in accounts, balances, and payments. This type of tool is also excellent for ensuring that your identity is protected.
Credit score ratings are a critical component to managing your ability to borrow money. If you plan to buy a car, get a job in a financial industry, get cheap car insurance, or purchase a home, you need a good score. By monitoring your score on an ongoing basis, you can make better decisions for yourself moving forward.

Thursday, May 30, 2013

Credit Score Facts - 7 Things You Probably Didn't Know Affected Your Credit Score

1. All Credit Reports are NOT Created Equal
This means that your interest rate is somewhat dependent on whichever credit report your lender uses. This may not sound significant but a few points could mean the difference between being classified from the no credit risk category to the some credit risk category or even the default credit risk category. This could mean having several percentage points added to your loan. Make sure you check which reporting agency your lender is using and if you have a better score with another agency, ask the lender to consider that report instead. Depending on the situation, it could be a good idea to switch to a lender who primarily uses a different reporting agency.

2. Where You Got Your Credit Card Can Affect Your Credit Score
In the past, your credit score was often calculated by rating credit cards issued through national banks higher than ones listed through local banks or credit unions. Although this calculation is rarely used anymore, some lenders still calculate your score this way. Owning a credit card issued through a local bank or credit union could be hurting your credit score if you end up with a lender using this old fashioned credit score calculation.

3. The Credit Report You Buy May Not Be The One Your Lender Sees
When you buy a credit report, the score you see is based on a specific calculation by that reporting agency. When a lender looks at your score, they could be using a different calculation and likely a variety of different scores based on calculations associated with specific risks (auto loan score, mortgage score, bankcard score, etc.). So don't be surprised if the lender replies to your loan request differently than you expected.

4. There Might Be Errors on Your Report
It is estimated that up to a quarter of consumers are affected by errors on their credit reports each year. Just imagine paying a higher interest rate or not getting approved at all due to an error! To avoid this, make sure to check your credit report at least once a year for errors. You have the right to one free credit report each year from each credit agency. Only you will be willing and able to find the errors so prudence may be your best bet here.

5. Divorce Doesn't Apply To Your Credit
Divorce will not automatically separate your joint accounts. Although you might manage your credit responsibly, your credit might be still getting damaged by your ex. When you divorce, you must send letters to each credit agency formally acknowledging your divorce. Even once you have done this, errors are likely still going to be made. Checking your credit reports after a divorce can be vital to avoid costly errors that will drop your credit score.

6. Credit Repair Companies Don't Repair Much
Although credit repair companies can talk a big talk, most of the time they don't walk a big walk. Most credit repair companies offer grandiose promises to fix your credit. The reality is they can really only send dispute letters to have items temporarily removed from your report to give you time to address them. However, if you cannot prove the error, the negative items will simply be put back on. Some of the better credit repair companies will negotiate with the creditor for you to make sure you are rewarded on your report for not defaulting on your loan. Although, overall these companies will make bigger promises than they can follow through on.

7. Your Credit Score Can Fluctuate A Lot
Your credit score is constantly being updated and your score is partially calculated by factoring in your credit card utilization rate (total card balances/card limit). One day you might have a 30% credit card utilization rate and another day a 70% or 80% credit card utilization rate. This factor can cause your credit score to fluctuate quite a bit. So don't be alarmed, just make sure you keep your credit card utilization rate to a minimum when seeking larger forms of credit.

Tuesday, May 28, 2013

What Exactly Is a Credit Score?

When you apply for a loan in order to buy the house or car of your dreams lenders will look at your credit score and they will use it to decide if they should give you the loan or not.
There are lots of Americans who don't know what a credit score is or how it is calculated. If you belong to this group of people, then don't worry because in this article you will learn all these basic concepts that are necessary to start improving yours and to buy the house or car of your dreams once and for all!

What Exactly is a Credit Score?
A credit score is a number of 3 digits that lenders use as an indicator of your capacity to meet financial obligations such as mortgage payments, car payments, credit card bills, loan repayment, etc. It basically tells lenders how likely you are to pay your debts.
It is usually a number between 300 and 850. The higher the credit score, the less risky you are to lenders. And the less risky you are to lenders, the better interest rates you will get. Also, the higher your credit score is, the more chances you have in getting a loan. Sounds simple right?
A score of 750 or more will give you the best interest rates and the best chance of being approved for a loan. On the other hand, with a of 600 or less you will have a hard time finding a lender who is willing to give you a loan. And if you find it, you will have to pay a lot of money in interest just because of that low score.
That's why you have to improve your credit score as soon as possible (if you have a low one or not):
  • To avoid high interest rates.
  • To save thousands of dollars in interest in the long run.
  • And to get the house or car of your dreams at the lowest cost possible.
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.

Amounts Owed (30%)
Amounts owed represent 30% of your credit score. It refers to the amount of debt you have in comparison to your credit limits. This is also called the "debt to credit ratio" and it works like this:
Let's say you have $10,000 available and you only owe $3000, then your ratio is 30%. So the formula for the "debt to credit ratio" is: your debt divided by your available. The lower the ratio, the better for your score
Important: If you have a high ratio, don't apply for more available credit to lower it. It will only hurt your score even more so please don't do that.

Credit Length (15%)
Credit length represents 15% of your score. The longer your history is the better for your score. This is based on the assumption that your past financial habits are likely to be the same in the future. And if you have a long history, the bureaus can see exactly what your financial behavior is.

New Credit (10%)
The application for new credit represents 10% of your credit score. Every time you apply for new credit, an inquiry is added to your credit report. This inquiry hurts your score, because it tells the bureaus that you are in the need for more money.
Also, taking new credit will bring down the average length of your credit accounts. This is because now the new credit account is taken into consideration to calculate the average length.

Credit Types (10%)
The types of credit that you have represent 10% of your score. It's good to have different types of credits because it shows the lenders that you have experience managing different credit accounts.
Important: Having different types of credits can help your score but don't go out and get loans if you don't need them. This isn't a significant part in the credit score formula (it only represents 10% of your credit score) so don't get yourself into more debt just to have a better mix of credit.

How Can I Improve My Credit Score?
Now that you know what a credit score is and where it comes from, the next thing you have to do is to start improving it as soon as possible. The truth is that it won't be an easy task (especially if you have a low one): it will take some time, money and patience but it will be worth it. A few more points could be the difference between buying the home or car that you and your family deserve or not!

For more information on how to improve your credit score Here

Thursday, May 16, 2013

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How to Improve Your Credit Score

                     < How to Improve Your Credit Score>

1=Obtain your credit report and score from a national credit bureau. The first thing you need to do is know where you are now, in order to know where you're going or want to go. Unlike your credit report, which you can get for free once a year, your score does not come free but it's a small cost and well worth paying for

 * Be sure to get the real FICO credit score because it is the score that most creditors use. So far, only three entities supply this score directly to consumers––do a search online for Transunion, Equifax or Experian, make your own selection and follow the instructions they provide individually.

*You're considered to be a poor risk if you have a credit score under 620

2=Resist responding to all those "pre-approved" credit card offers you get in the mail. This also includes offers sent to you online. It's easy to think along the lines of, "What can it hurt to apply? They say I'm already approved." The reality is that these easily approved credit cards can and do hurt. Each time one of the national credit bureaus receives an inquiry, your score goes down a few points.

* This includes store card accounts; the less you have, the better.

* The fact that frequent checking harms your score also means that you need to avoid checking your score compulsively.

3= Avoid jumping from credit card to credit card. If you "transfer your balance" - a scheme that doesn't hurt you, and gets you 0% interest on your balance for a period of time, sometimes as long as a year - don't close the old account. Your credit history looks better to the credit bureaus if you have long-standing, established accounts. This looks good even if many of your accounts are never used anymor

4= Be stable. There are several ways to impress the stability of your life on a credit score reviewer:
   Buy your own home. Owning a home is viewed as considerably better than renting one. Although affordability of housing has changed in recent years, owning a home is still within the reach of many who save regularly and spend within their means.

* Avoid moving around a lot. If you physically reside at the same address for a long time it is better for your credit history than if you move frequently.

* Get married. If you examine two people with very similar credit histories, the one who is married will have a markedly higher credit score than the single person. Strange, but true!

5= Rely on your seniority in age. This you really can't do anything about, being older, but at least there's something good about aging! Age is another personal characteristic that the credit bureaus factor into their ratings. Older is better. Even though you cannot magically increase your age (and who'd really want to do this, anyway?) it is nice to know that as time goes by, your credit score automatically improves.

6=Pay your bills on time, regularly. This is actually first in the order of things you must do to better your credit score. Each late payment dings your credit score and presents a picture of unreliability. You must determine that, going froward, you will be paying your bills on time. The biggest chunk of your credit score is based on your payment history

7= Reduce your debt to credit ratio. The next big chunk of your score after your credit history, is determined by the balance on your available credit. Seek to keep your balance at approximately 30 percent of limit, or less. This means that if your credit card limit is $1000, you should aim at having a balance of not more than $300.

* Having high available debt and low indebtedness helps a lot. In other words, if you have lots of available credit, and little or manageable debt, that looks better than being in hock up to your eyeballs, or just having no established credit at all.

* If you pay off your credit cards in full anyway, consider paying them off a day or two before the billing cycle is closed (check online for the day, and the current total). That way, your bill will show a very small or even negative amount, which gets reported to the credit scoring institutes. This increases your credit score up to 50 points (everything else unchanged).

8= Dispute things on the credit report that are 'wrong'. You can generally get one 'bad thing' off each credit report every year. Keep at it consistently if you used to be a 'bad person', at least as far as the credit card companies are concerned. With persistence and patience, you can whittle down the black marks over time.
* When reporting errors (inaccuracies or incompleteness) or fraudulent use of your identity, provide all the forms of proof that you have, such as cancelled checks, stamped invoices, police reports, etc.

* If you have some late payments showing on your credit report, these can really hurt your score. Collections, judgements and tax liens are devastating. You can negotiate for removal of such negative notations. The ways of going about this are beyond the scope of this article.

* Be aware that unlike what you may have heard or read elsewhere, getting negative information removed from your report is not an easy thing to do. Be persistent, factual and patient.

9= Note that 'paying off' loans increases your score. Oddly enough, occasionally refinancing and trading in cars with loans on them 'pays off' loans, too. If you do refinance, do it for no points and a lower rate.

10= Get out of debt. Getting rid of as much of your debt as you can is the first and most important step in improving your credit

* Get rid of your credit cards as you pay them off. Too much credit can be a bad thing. Try and keep your older cards, but get rid of the rest.

* Budget, budget, budget. Creating a budget will help you get rid of your debt, improve your credit, and stay out of debt. While the credit bureaus won't see your budget, it will see the good results of you sticking to it.

11= Build up different types of credit. A "healthy mix" of different types of credit builds up you score better than does simply one type. For example:

* Let's say two persons have $10,000 total in total credit each, and both are making timely payments. One has only one credit card. The other has a credit card, a car payment and a bank line of credit (overdraft protection). The second person's score will often be much better than the first one's.

Good Luck