Lets discuss credit scoring (FICO) and some useful pointers for everyone who is in need of credit. Credit scores or FICO range on a scale from 300 to 850 in the United States. If yours is lower than 620 then you are then considered by potential lenders as “high risk” also termed “sub-prime”.
If your own rating is below that of 620 then it could well be that you will not only struggle to get the best terms and conditions with your loan or credit cards but you may struggle even to actually attain credit at all. This is because you are deemed higher risk the lower your scoring is.
If though your score is above the 620 level you will be deemed lower risk and as such will be offered better terms with your credit and quite frankly, you will be able to pick and choose who you borrow from with ease.
Just to shed a little more light on the importance of the credit points system – recently the Consumer Federation of America did some research upon the point system. They found that if everyone in the United States who is at all credit worthy (meaning old enough to attain credit) were to improve their own credit score by a mere 30 points, then the credit card annual bill for the whole of the United States would drop by a rather huge 16 billion dollars!
To put this in a more personal perspective, if you were scoring at around the 620 mark, which is borderline for a poor credit rating, it would not be difficult to raise this up those 30 points to then bring you up to what is now perceived to be very nicely credit worthy. So, let us now take a look at how these ratings are actually balanced out and tallied together.
# do you pay your credit cards or bills on time? This makes up 35% of your overall credit ratings.
# how much do you owe on credit currently? This makes up a total of 30% of your rating.
# how long is your credit history – generally this means the older you are the better your rating, although not entirely necessarily so. This adds up to 15% of your rating.
# what type of credit you have been using – some types of credit use is rated higher or lower than others. Equates to 10% of your rate.
# what sort of and how much credit have you recently applied for? Invariably affects your ratings to 10%.
The top 2 points are key to progressing to a healthy or otherwise credit rating so make sure you pay all bills on time (thus also avoiding any late payment fees). Further, try to keep your balance on any credit cards to a manageable level – this could be around 50% of the total card allowance or thereabouts.
You do not need to have a wonderful credit rating to be offered the best terms. If you are on the scale at or above the 720 mark you should be in very good standing to be offered all forms of credit at highly competitive rates.
So even if you are on the border at the 620 mark its not such a long way off your real goal of 720. So the idea is to plan ahead and keep the spending within your capabilities and this way you will be doing yourself a really big favor!
There is more to learn about credit card help and a debt consolidation program to suit your needs.