What is a Good Credit Score?

By on | General Debt & Loan Consolidation Information.

Individuals who are in the market to buy a new home, car or any other type of major purchase need to know what their credit score is prior to applying for the financing. This is because credit scores play a key role in determining the type of loans and interest rates borrowers are eligible to receive. Those with good credit can usually lock in better rates and terms, however bad credit borrowers are often limited when it comes to obtaining competitive interest rates and loan terms. So the question is; what is a good credit score? In order to answer this question, it’s important to understand that there are three primary credit bureaus that provide individuals with credit scores. They include Experian, TransUnion, and Equifax. Of these, Equifax is the credit bureau which is considered to be the most used and trusted due to its initial presence in the market. Individuals are not randomly scored with good or bad credit. In fact, credit scores are specifically based on several different factors, including the following:1. Type of creditAlthough having a good mix of credit types is considered to be great, too many open accounts is usually “frowned upon” by lenders.2. Length of time individuals have had creditThe specific amount of time individuals have been using credit also plays a role in determining credit scores.3. New creditWhen it comes to applying for additional credit, an individual’s score usually drops when too many credit inquiries are made over a short period of time. 4. Payment historyA significant percentage of a person’s credit score is based upon their payment history. While a few late payments are generally okay, more one too many late payments can get borrowers in trouble.5. Outstanding balancesWhen individuals reach, or are close to reaching their credit limits, their score tends to take an automatic dive. This is why it’s important for borrowers to pay their credit cards down immediately when approaching the credit limit. Most creditors use the Fair Isaac credit-scoring model, commonly known as FICO to evaluate credit scores for individuals. The following is a breakdown of their scoring methods, which can also help borrowers answer the question, what is a good credit score?

700 and higher: Excellent credit 680-699: Good credit 620-679: Satisfactory credit 580-619: Not exactly bad credit, but extremely close 500-580: Very low credit, expect to pay significantly higher interest rates for loans 400 and below: Bad credit

For individuals who fall in the lower category of the FICO credit-scoring model, all hope is not lost, as there are several ways to improve bad credit. In addition to making minimum monthly payments on time, credit card holders should contact their creditors immediately if payments are missed unintentionally. It’s also wise for individuals to avoid opening and applying for new accounts, especially if they are not considered necessary. Furthermore, it’s always a good idea for individuals to use credit sensibly, which means abstaining from frivolous or unnecessary purchases on their credit cards. Individuals should make it a habit to check their credit card statements carefully every month for any discrepancies, and pay outstanding balances in full whenever possible. Finally, borrowers should take advantage of the free credit report policy which the U.S. legislation has mandated once a year, and review their status for accuracy.There are also many types of credit services that can help individuals receive debt relief, and improve their credit score. For example, those with bad credit can often turn to different credit counseling agencies, who offer assistance with a range of credit services, including debt management plans. These plans usually allow credit counselors to consolidate a debtor’s loans, which in turn enables them to make one monthly payment to the credit counseling company, versus multiple payments to several lenders. Because this makes it easier for debtors to manage their finances, they can continue making payments on time and slowly begin to rebuild their credit.

Credit Reporting Agencies: Serving both Lenders and Their Prospects

By on | General Debt & Loan Consolidation Information.

To determine whether a credit applicant is a good or bad credit risk, lenders rely on the data produced by credit reporting agencies, alternatively referred to as credit bureaus. These boast voluminous databases of consumer credit records on millions of Americans and offer lending institutions an in-depth look at a prospective borrower’s credit history. The… Read more »

The Fair Credit Reporting Act: Watching Over Borrowers

By on | Home & Mortgage Refinance Information.

One of the most comprehensive consumer protection laws regulating credit is known as the fair credit reporting act. Enforced by the Federal Trade Commission, this federal law requires credit reporting agencies (CRAs) to act fairly and equitably when collecting, disseminating, and utilizing consumer credit information. The act ensures that credit bureaus ensure the accuracy, pertinence,… Read more »

The Pivotal Concept of Credit Card Rates

By on | Credit Card Debt Consolidation Information.

Credit cards facilitate the lives of millions of Americans by ensuring the attainment of emergency funds, the affordability of large expenditures, the payment of purchases overseas, and the booking of reservations, among other things. For fiscally-responsible consumers, credit cards are a formidable, convenient tool enabling them to achieve a multitude of money management objectives. Before… Read more »

Ensure Accuracy & Avoid Identity Fraud with Free Credit Reports

By on | General Debt & Loan Consolidation Information.

In the United States, the ability for individuals to make large purchases, obtain loans or rent out property is all dependent upon their credit worthiness. The truth is without a decent credit rating, life can become extremely difficult. This is because financial lending institutions perform a thorough credit check before lending out any money. Therefore,… Read more »

Reverse Mortgage Information: The Benefits and Disadvantages of a Reverse Mortgage

By on | Home & Mortgage Refinance Information.

How Does a Reverse Mortgage Work? Reverse mortgages are becoming increasingly popular as senior citizens learn more information about the concept of how a reverse mortgage works. A reverse mortgage works like a regular home mortgage loan, but in “reverse”, which means that the reverse mortgage would allow you to receive tax-free payments in exchange… Read more »