Credit Scores

We buy mostly everything on credit today. Credit is usually needed to buy a house or a car, and you'll benefit by having a good credit score. A good credit score will help you get lower interest rates on mortgages, car loans and other financial products.

In fact, from landlords, to insurance companies, to utilities, everyone looks at your credit scores, as they are a reflection of your financial health. Today, even employers check your personal credit scores before offering you a job. If your credit score falls below 620, it would be wise to immediately undertake credit repair as it will be very difficult for you to get loans with reasonable terms.

Before discussing the factors affecting your credit scores, it's important to understand who maintains your credit reports and how they do it.

The Credit Bureaus
The three major credit bureaus - Equifax, Experian, and TransUnion - calculate your credit scores. They generally use the same methods and formula to calculate your scores, however, for various reasons they sometimes come up with a different rating. One agency may have more updated information about you. A creditor may have shared information about you with one agency only, but not with the others. When checking your scores, creditors take the average of the three scores from these three agencies.

Your credit scores range between 350 and 850. A score of 680 and above is excellent for obtaining mortgage financing at low interest rates. A credit score of 621 to 679 is an average score and you would have to pay a slightly higher rate of interest. A credit score of below 600 makes you potentially unreliable and very difficult for you to obtain credit of any kind. If your credit score falls below 600, you need to undertake steps to repair your credit immediately.

Factors that Affect Your Credit Scores
There are several factors that could negatively affect your credit scores and there are ways to prevent these factors from affecting your scores.

• Check your credit report regularly for your history of making debt payments and the amount of debt you presently carry. If you notice any irregularity or discrepancy, immediately report to the credit bureau to have it corrected. Once corrected, it will raise your credit score.
• The length of your credit history is another factor. The longer your good credit history, the better it is for you.
• Do not close old or paid off accounts. These show the length of your credit history and contribute to higher credit scores. It used to make sense to close old accounts you're not using, but with today’s system of scoring, this actually hurts your credit score. Closing these older accounts, in effect, lowers the total credit available to you and causes the balances you have, to appear larger when calculating credit scores.
• Paying down your debts or paying them off is a good way to improve your credit score. Your outstanding balance on your credit card is reported once a month to the credit bureaus, and they don't care whether you pay or carry your balance forward every month. What matters is the spread between the amounts of debt you carry and your credit limit. The more wide the gap, the better your credit score.
• Make your payments on time. Delayed payments appear on your credit reports and adversely affect it. 35% of your credit score is dependent on your payment history. The current or recent payment history has more weight than that of three years ago. Remember, missing one payment affects your credit score by 50 to 100 points. Timely payments are the best way to rebuild and raise your credit score.
• Avoid bankruptcy - This is a sure shot way to destroy your credit score, as much as by 200 points. A bankruptcy gets reported up to 10 years. Avoid bankruptcy at all costs.
• Your race, sex, age, level of education, or marital status has no bearing on your credit scores and neither does the fact that your application for credit has been turned down.

Take care to maintain a high credit rating and you'll get credit and loans at good rates. Consider the above steps to undertake credit repair if necessary to improve your credit score. But the best option is to maintain a healthy credit rating in the first place. Keep your outstanding debts at a bare minimum and pay your debts on time to enjoy a healthy credit rating. Prevention is always better than the cure.

FICO Scores, Credit Repair and Home Loans - The Real Truth
The process of calculation of the FICO score is complex as it tries to integrate many models of evaluation. In the process of evaluation, all information about the finances and credit history of the borrower are given specific points.

Maximize Your Credit to Minimize Your Payments
Your credit score. Those three little digits can have a six-figure impact on your finances. For instance, did you know that on a $300,000 30-year home loan, the difference between a poor credit score and a great credit score is $589 a month, or $212,040 over the life of the loan?