What is a good credit score?

FICO scores range from around 300 to about 850. Approximately 1 percent of the population with established credit has credit scores below 500 and another 13 percent score from 500 to 600. FICO, doesn’t seem to operate on real-life logic, FICO gathers and assesses credit and loan information from the three largest credit bureaus, Experian, TransUnion and Equifax, and disseminates this information to banks, lenders and credit card companies. FICO also provides credit scores to individual consumers who wish to keep track of their credit information either as a regular financial maintenance tool or for purposes of determining if they have a good credit score when applying for credit or a loan.

Payment history accounts for 35% of your score. The amount that you owe accounts for 30%. Payment History One of the most important factors narrating your payment history placing the emphasis on recent activities, it accounts for the 35% of your total score.

FICO scores generally do not equate your rate search with higher credit risk. FICO is so big that it's used interchangeably with the term "credit score." Most people call credit scores a FICO score. Other companies' numbers can give you a sense of how your credit is viewed by lenders, but if you really want to know how lenders see you, you need to check your FICO score.

FICO recognizes that people need to shop around to get the best rate when applying for loans, so they don’t lower your score as much when you have several inquiries in close succession. Generally speaking you still shouldn’t apply for too much credit, but if you’re comparison shopping to get the best rate on a loan, don’t worry about the resulting inquiries on your credit report. FICO's own information would indicate that a good history evaporates a lot more quickly than does a bad one, no matter how short lived. Most bad credit stays on record for at least seven years, a bankruptcy for ten.

Currently for some banks depending on the loan type all you need is a 650 credit score, but not everyone with a 650 credit score can get a loan. It really depends on your circumstances. Banks, credit card companies, auto dealers, retail stores and other lenders decide if you get your loan. Most businesses that issue credit or loans use credit scores to quickly summarize a consumer's credit history, saving the need to manually review an applicant's credit report and providing a better, faster decision. Banks want people with positive credit histories. They look for people that pay on time. Banks and financial institutions determine their best rates based on their own assessment of their customers. As such, definitions will change from lender to lender and industry to industry.

Bankruptcy is an unpleasant situation that can cause stress and nervousness for anyone who faces the situation. Bankruptcy is the situation when the person has accumulated very huge debts cannot repay the loans and hardly have any money in their bank accounts to handle the expenses. Bankruptcies can be reported for 10 years. Bankruptcy will easily take off up to 200 points from a credit score. After a bankruptcy, consumers will find it incredibly hard to find a loan with interest rates that are low.

Banks feel comfortable lending to people with such high credit scores because the odds are that they will not default. Those with scores ranging from 700-749 have a delinquency rate of around 5%. Banks report to credit agencies, so make sure that you pay your debt on time to have your credit score improved. Banks and mortgage lenders, car dealers, insurance companies, employers, landlords, retail stores, credit card issuers, even utility and phone companies. These creditors pay the credit reporting bureaus a fee to look at your credit report in order to evaluate how responsible you are.

Repairing your credit rating may not happen overnight. Before you start, get a score of your current credit rating and see the areas that you need to focus on. Repairing your credit reports and saving now may mean financial freedom in the long run.

Lenders like to see that you're spending within your means, which translates to using less of your credit limit — the lower percentage the better. Lenders look at your financial situation as well when determining your credit worthiness. They will see how many credit cards and loans you have, if you have made any late payments and how many years have you had a credit history. Lenders will likely offer you the best rates and terms. Continue practicing good credit behavior and you should have no problem receiving favorable loan terms and offers with little to no down payments.

Lenders use your credit score to judge how likely you are to repay a loan. A poor credit score may mean your loan application is rejected. Lenders will take a look at this potential debt load before considering how much they will lend you. They count the full amount against you, as if you were to go out and max all your cards tomorrow.

Lenders used their past experience at observing consumer credit behavior as the basis for judging new consumers. Lenders report your activity every 30 days to the credit bureaus and that’s the information that is used to determine your score. If you have a $2k balance showing on the credit report it’s because it wasn’t paid off before the lender reported it to the credit bureau at the end of the reporting period. Lenders may assess what constitutes a good credit rating differently. In fact defining good credit rating is flexible to a degree and some lenders may be interested in specific aspects of your score, more than in other aspects.

Lenders, such as banks and credit card companies, use credit scores to determine credit limits and interest rates for loans. Lenders check credit scores whether you're applying for a line-of-credit, loan, credit card, mortgage, equipment loan, even a lease. They'll also set interest rates based on your credit; a higher (better) credit score may save you hundreds — even thousands — of dollars in interest.

They will see how many credit cards and loans you have, if you have made any late payments and how many years have you had a credit history. Lenders will likely offer you the best rates and terms. Continue practicing good credit behavior and you should have no problem receiving favorable loan terms and offers with little to no down payments.

Consumers who do not have much financial history may not have good rating. Such consumers can however get their figures increased through what is called “piggybacking,” a practice where a consumer is added as an authorised user on a card issued to someone else, usually a parent or a partner. Consumers need to be very careful about making a choice. See to it that you can enjoy the 0 APR for at least 6 months or longer.

Missed payments can lower your score by as much as 100 points! Missing even one payment can shave off valuable points from your score. By using banking features like automatic payments and online bill pay you stay on track to maintain timely payments.

Creditors see the number as an indicator that an individual will repay a loan. Creditors and lending institutions look at your outstanding balances in regards to credit limits. If your balances are really close to their limits, for example if you’re line of credit limit is $20,000 and you have used $18,000 of that limit, your score could suffer.

It’s a gross simplification but the point is you don’t need a perfect score and it’s almost impossible to get a perfect score. Acquiring a loan to buy the house that you want depends on your credit score. Your credit score also plays a big role in getting approved for a loan to buy the car that you have had your eye on.

Identity theft affects nine million people in America a year. On average, the victim ends up spending forty hours and over $400 correcting the criminal’s errors. Identity thieves can take those forms out of your old mailbox and send them in. You can either opt out permanently or for five years.

Mortgage companies and other lenders use it to decide if a person is a good credit risk. But how many people actually know what a good credit score is? Mortgage lenders ask for your credit score from the credit rating agency and use this to evaluate your loan application.

Carrying a debt over month to month can be a very bad thing in the long run. While it won’t hurt your credit score when your carry debt (after all, credit card companies make their money on interest rates), it will lead to several bad habits, which can put you in a very dangerous hole. Carefully check each report for common errors such as misspellings, name confusions, and incorrect information. Car loans, student loan, a previous mortgage if you had one and in particular credit cards, we all have credit cards.

Step one in the process is making sure that you have a current copy of your credit report. Congress recently amended the Fair Credit Reporting Act so that consumers may now receive one free credit report annually. Step two on how to get a good credit score is to pay all of your bills on time, preferably early if possible. Every time you pay your electric bill, or almost any other bill, a few days late, this lowers your credit score some.

Given the current state of the economy, lenders are simply refusing to loan money to people with bad credit. It's too much of a risk for them, given what has happened over the last few months.

Perhaps you have had a few times in the past that you have made some late payments. If so, this can lower your credit score. Perhaps a better measure of financial health is your ability to withstand catastrophic events like job loss or medical emergencies while maintaining a decent quality of life.

Checking your credit score can only help you improve your credit score. The reason for this check is that there might be certain errors in your credit report.

Thank you for taking your time to read this article. Your comments on this article will be highly appreciated. To access hundreds of Gurmit’s articles please visit http://gurmittoor.blogspot.com.

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Gurmit loves travelling; he has been over 70 countries. He speaks fluent Cantonese, Polish, Hindi, Punjabi and English. Gurmit is an author, writer, insurance and mortgage expert. He frequently writes on various topics of interest to his readers. Gurmit Singh is a licensed mortgage expert with Dominion Lending Centres Mortgage Villa.

Gurmit Singh, mba
Mortgage Expert
M08009905
Dominion Lending Centres Mortgage Villa (11574)
Email:gurmit@gurmitsingh.ca
Website: http://www.gurmitsingh.ca