Raise Your Credit Score Rating
Friday, February 1st, 2008
It is almost appalling to realize the vast number of consumers who do not know the tremendous impact that their credit score rating has on their everyday lives. Most people have heard of it but they have no idea how it is calculated or how and where it is used, which is probably much more widely than most people realize. Your credit score, sometimes also known as a FICO score, should be as high as possible to give you the benefits that a good credit score will provide.
Your credit score affects virtually every area of your life, and is not even limited to financial things. For example, a poor credit score can cause you to pay more for car insurance and even prevent you from getting that new job. By contrast, a high credit score makes it much easier for you to be approved for attractive loan and credit programs and makes many areas of your life much easier.
The three digit number that is used to show your credit score rating is calculated using a special formula. The scores that you can get are between 300 and 850 when you are dealing with a FICO score. You will find that there are several different factors that the score is based on. First of all, 35% of the score depends on your payment history and 30% depends on the amount of money that you currently owe. Another 15% is dependent upon the length of your credit history, 10% on the new accounts you have applied for or opened recently, and 10% is based on the different accounts that you have.
If you have a credit score over 750, this is considered excellent credit and you would be considered a very good credit risk for potential lenders. The median or average score would be between 640 and 710, which would indicate generally good credit but with a couple blemishes in the past, which is where most people fall. Scores under about 590 would be considered a credit risk and may have trouble getting approved for new lines of credit.
Whether or not you qualify for a new loan or line of credit is determined by your credit score. This includes your eligibility for loans, mortgage, and credit cards, and what interest rate you will be assessed, or even if you will be approved or not. It can also affect whether you need to leave a deposit when renting a home or buying a car.
To raise your credit score, there are several things you can do. The very first thing is to start paying each and every one of your bills on time so that you create a history of on time payments. Keep the outstanding balance on your credit cards well below your credit limit, where the ideal amount is around 25% to 30% of your credit limit. Avoid applying for new accounts all the time since having a lot of open accounts is negative.
As you can see, your credit score rating is extremely important. Take the time to find out what your score is so you’ll know how it is impacting your life. If your score is less then satisfactory, then start working to improve it to insure a better financial future.