Credit Scores

You just want to get a loan and suddenly you are bombarded with all this questions about your credit score. And you don’t really know what to answer since you don’t even know what a credit score is.

A credit score is your credit grade, representing how much of a good creditor you are. This score is dependent upon your credit history and credit report information, which is gotten from credit bureaus and credit reference agencies such as Equifax and TransUnion. Banks, credit card companies and lending companies use the credit score to have an idea if a person will pay what they borrowed in time. These scores will help these companies calculate their risk and determine if you will be lent to or not.

Another use for the credit score is to determine how many percent interest rates will be given to the borrower and what will be the terms of payment. People with high credit scores will be given more time frame to pay their debts and much lower interest rates.

A person with a not so good credit score may be given shorter terms in their payments but high interest rates. This is because they are riskier to lend money to so the banks and lending companies would want to get a high interest from them at shorter periods of time.

Because of the importance that credit score information gives to companies, banks and lending companies are now not the only ones that use these information. Even mobile phone companies, insurance companies, and private companies also use this information to check on the background of their clients and potential employees and see their character.

There are actually a lot of ways to determine what a person’s credit score is. One of the most popular is the FICO score which was created by Fair Isaac Corporation. FICO is being used by lenders of mortgages to determine which borrowers are likely to default on their payments. A FICO credit score can range from 300 to 850.

When before only financial institutions have access to their credit score, now it is being commercialized. Equifax is actually offering consumers a glimpse of their FICO score through their website for a fee, $12.95. The same goes with other credit bureaus such as TRansUnion and Experian but what they are offering is not the actual FICO score but their own scores.

Both companies however swear that their scores are comparable to the FICO scores. Experian charges the same price as Equifax  for their score, $12.95 while TRansUnion charges $9.00 for a credit report that will also have the credit score. This can be purchased by mail, through phone and of course, the easiest course, online.

Some however do not see the need to buy these things as they are entitled to a free credit report from each of the three agencies. Some states even give a free credit reports within 30 days of being rejected of a credit by a lending institution or when they receive a not so good credit terms because of their credit score.

It may take some bit of work until you get the idea of how to improve your credit score. A credit score may be one of the most important aspects of your financial situation that would need your constant monitoring, especially if you always have the need to borrow money from lenders. Having a low credit score will ensure you of having trouble getting your credit application approved as you would have wanted.

Your credit score tells lenders of how dependable you are as a borrower. From your credit score, lenders and credit institutions may be able to gauge your standing as a borrower. That is because the credit score is a mathematical measure of a person’s borrowing habits and behavior based on some important credit factors. A formula developed by the Fair Isaac Corporation (FICO) is usually used to calculate for one’s credit score. That is why your credit score is also usually referred to as the FICO score.

When you have a low credit score, it tells the lender straight away that you are not a very prospect as a borrower. This may be based on your previous credit accounts from which you may have defaulted on, late payments of debts, bankruptcy or foreclosure issues that you may have in the past and other similar factors. The higher your credit score, the more attractive you are as a borrower in the eyes of the lenders. This might mean that your credit application from them might just be easier to approve.

There are many ways that you may be able to improve on your credit score. This will include having a closer look at your current credit standing. If you do have outstanding credit to take care of, it would be good to pay your bills on time. Delinquent payments of your outstanding credit have a major negative impact on your credit score. It is also important to note that the longer that you try to pay your bills on time, the better it will be for your credit score.

If you do find yourself missing on some payments, it may be wise to get current as quickly as possible on your payments if you so can. Staying current with your outstanding credit accounts may also have an effect on your credit score. What’s more, your credit record, along with the missed or delinquent payments, may reflect on your credit report and will stay there for a period of seven years. It will be looked upon as a smudge on your report even after you have paid off your debt.

If you find yourself having a hard time managing your outstanding credit, it may be time that you contact your creditors or ask for the help of a qualified credit counselor. These actions may not immediately improve your own credit score. But the sooner you act in managing your debts well and paying your bills on time. It will eventually make your credit score better over time.

Once you learn how to improve your credit score, the better your chances will be on availing of a much needed loan or mortgage when you really need it. It would be frustrating for one to apply for some much needed credit and not get approved in the end, all because of a low credit score.

Improving your credit score can also assure you that you have better credit options especially during times that you might need it most.

The auto industry has been hit hard and new car deals can save you thousands of dollars. Issue is that even if a car is reduced $10,000 it is still not affordable for over half of the US population. The cash for clunkers program seemed to help some new car buyers but the true affect that had on sales is still being debated. Ford and Honda reported a boost in sales but GM and Chrysler lost out due to their lack of smaller fuel efficient vehicles. Kind of makes it obvious why Ford and Honda both did not need bailout money to avoid bankruptcy.

The state of the auto industry is still being decided. Of course there will be new car buyers now and in the future, but there will be millions less than there were prior to the recession. The good news is that the used car dealers should see an increase in sales over the next 3 to 5 years. As the economy rebounds we will still see high unemployment numbers and many US families faced with lower household incomes. Unemployment rates do not tell the entire story due to the fact that many Americans are forced to take part-time positions, pay cuts or forced into early retirement. Each one of these factors creates a lower household income but does not reflect in unemployment numbers.

This drop in household income is going to turn new car buyers into used car buyers. In the end there is nothing wrong with a good used car. Used car dealers better be ready to capitalize on this expected trend, it may be a once in a lifetime opportunity.

Consumers shopping for a good used car may be able to find great deals on trade ins at your local new car dealership or search online. Finding a good used car online is very easy. Auto loan rates on a used car are not as low as new car loan rates but if you have a good credit score then financing should not be that big of a hurdle. If you have bad credit and need bad credit repair it is recommended you try and improve your credit scores prior to any major purchase like a car.

Your credit score determines if you will qualify for financing, the interest rate you will pay for mortgages and loans, the cost of your insurance premiums, and can even affect your chances of securing employment. Because credit scores are so important, many people wonder exactly how credit reporting agencies calculate a person’s credit score.

Unfortunately, the exact formula used to calculate a credit score remains a mystery to consumers, and many people suspect it is actually a mystery to the credit reporting agencies as well. While it is impossible to know the mathematical formula they use to calculate credit scores, we do know the various factors credit reporting agencies use to calculate a person’s credit.

Credit scores are calculated by analyzing a person’s payment history, the amount of credit a person has been extended, the ratio of outstanding debt to available credit, the length of time that credit accounts have been open, and any unpaid or delinquent accounts.

Payment history is a straightforward part of the credit score puzzle, with consistently on-time payment increasing credit scores and late payments decreasing them.

The amount of credit you have will also help or hurt your credit score. The more credit you have, the higher your credit score will be, unless you have a high debt to credit ratio. If the balance of your loans or credit cards is a high or even moderate percentage of your total available credit, it will bring your credit score down.

The longer your credit accounts have been established and in good standing, the higher your credit score will be. Too many new credit accounts can lower your credit score, so opening new credit cards or taking out new loans just before you want to apply for financing such as a mortgage or car loan is not usually a good idea.

Perhaps the most damaging factor for credit scores are accounts that are not in good standing, because they are unpaid, delinquent, or late. The best way to raise and maintain a good credit score is to always make credit payments on time, keep a low debt to credit ratio, do not open too many new accounts at one time, and make sure no bills become delinquent.

Reviewing your credit report after a bankruptcy is very important. You filed for bankruptcy because you needed a fresh start and your credit report should reflect all accounts included in the bankruptcy. After bankruptcy, you debts should be shown as zero and paid off, although the record of the bankruptcy is still there. This is a sort of balance which is positive on one side, and negative on the other. Generally, your ability to pay off a debt is increased after bankruptcy due to the absence of other debts. After a period of 10 years has expired, a bankruptcy can be written off your credit record.
Accurate Credit Reports after bankruptcy

This is extremely important. You would be surprised to learn that many individuals after bankruptcy still have credit reports that show outstanding debts. Whether due to laziness or carelessness, credit agencies often keep inaccurate information about your debts on their records. This misinformation will most definitely ensure that you never get any credit from anyone again.

To avoid this it is recommended that you request a free credit report within 30 to 60 days after your bankruptcy is complete and review it over the next several months. If you still have unpaid debts on your credit report you need to work with the creditor to update your credit report.

What does your rap sheet say about you? It reveals how prompt you are in paying back loans, how much money you could borrow should you decide to go on a spending bender, and how many times you’ve applied for credit. What it does not reveal is your salary, business debts (unless you personally guaranteed a loan), and whether or not you’re a generous tipper.

Your credit record also might not reflect all of your credit accounts — such as travel, entertainment, gasoline card companies, and credit unions — since some of these creditors do not supply information to the credit reporting agencies. Your deposit information, such as your saving’s account kitty, are not part of your credit report. An individual credit report does not contain your FICO score, as calculated by Fair, Isaac.

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