Archive for the ‘Credit Scores’ Category
The majority of the general public doesn’t understand how their credit score is calculated, much less what a good credit score is. Generally speaking, one has to establish a record of timely payments and available credit to increase their score. Higher credit scores will enable you to finance more expensive items such as homes, cars and qualify for most credit cards.
Credit scores range from 350-850. It is rare to see credit scores above 800, just as it is rare to see credit scores below 500. This should provide insight as to how broad this scale is.
Most people with a credit score of 700 or higher will be able to finance whatever they wish (assuming there are no outstanding collections, judgments/garnishments, bankruptcies, etc.). When applying for a mortgage, this score also assumes that the individual has everything else in order, such as: income, cash assets or seasoned cash reserves in the bank (typically a two-month average balance), a limited amount of liabilities (or low debt-to-income ratio), and employment for two years or more in the same industry for the purpose of proving a solid or sustainable income. When applying for a car loan sometimes requirements are less strict.
It takes time to be able to achieve a credit score at the 700 level or above. Typically, to obtain credit, you must be 18 years of age. At this point in life one has not established any credit. To establish credit, it helps to maintain a good record of payment with utilities companies and obtain a credit card or two. A friend of mine recommended that credit score could be increased by obtaining three credit cards, charging $100 to each of them and paying them off using the minimum payment every month for 12 months or so. This exact strategy, however, explains the general principle of how credit is established.
Credit takes time to build and to repair. Most people starting to build credit in their late teens won’t see a 700 credit score until they’re 25. Repairing credit is much harder with regard to increasing score because many times the damage has been done. The hassle of paying off collections/judgments and then getting the paperwork to the credit bureaus and then, on top of that, having to wait for them to update the report can be difficult to tolerate. Some people opt for credit repair agencies to help them. While this can be a convenience in a difficult situation, it can counter-act an increase in your score if the bureaus catch wind of it.
A reduced credit score can drastically affect your ability to obtain a loan in the event you would need one. If the score range is say 620-680, you’re likely going to get a much higher interest rate than if you had a score of 700+.
W. Paul Stogner