| |
| |
|
WebsiteAlways |
|
Credit Scoring: What You Dont Know Can Hurt You
You've probably heard the term credit scoring. You may have some idea that your credit score can have an effect on your life. For example, you may understand that when you apply for a mortgage, the mortgage company will check out your credit score. But did you know that the interest rate you can get on your mortgage -and on credit cards - will depend heavily on your credit score? Did you know that more and more employers will check your credit score when you apply for a job, and that insurance companies may raise your premiums or even cancel your insurance based on your credit score? So, what is a credit score and how is it calculated? Your credit score (in some cases, it is called your risk score) is a rating of your credit worthiness or how likely you are to repay a loan and how likely you are to repay it in a timely fashion. And it can have a dramatic effect on your life. There are three companies that gather information on how you handle credit. They are Equifax, TransUnion and Experian. They each determine your credit score based on a formula developed by the Fair Isaac Corporation but each calls its credit score something different. Trans Union calls its credit score "Empiraca." Experian calls its score "FICO," and Equifax will tell you its credit score is "Beacon." Credit scores range from 400 to 900 with the average score somewhere around 700. This is one case where higher is not better as the higher the score the greater the risk you are thought to be. What are the factors that make up your credit score? There are five factors that determine your credit score. The first of these is payment history. About 35% of your credit score may be based on how late you have been paying your bills (30, 60 or 90 days). The later you have been, the more negative effect this will have on your score. So will matters that are in the public record, such as bankruptcies and accounts that have gone to collection. About 30% of your credit score will be based on the amounts you owe. If you have, for example, a credit card that is close to its limit, this can impact your score negatively. This means it may be better for you to have a lower balance on several different cards than a large balance on one card. The third factor in your credit score is the length of your credit history. If you have an account that has been open for a long time, this can have a positive effect on your credit score. About 15% of your score will be based on the length of your credit history. About 10% of your credit score will be based on how much new debt you have requested. So, if you recently applied for a number of new credit accounts, your score may be negatively impacted, Your credit score will also depend (about 10%) on the types of credit you already have. For example, if you have loans from finance companies, this can negatively affect your score. Like it or not, your credit score will also reflect your level of education. For example, a college-educated person will be given more points than a high school graduate. How long you have lived in a single location will also affect your credit score - for good or for bad. So will the number of years you've worked for the same employer. The companies that score your credit just plain like stable people. And finally, if you are a homeowner, you get additional points. Is credit scoring fair? It is fair in that it does not take into account personal factors such as your race, gender, color, religion, national origin or marital status. It also does not factor in interest rates you are paying on your credit cards, nor does it include factors such as child or family support obligations or rental agreements. It also does not take into account inquiries about your credit score by employers or lenders that were made without your knowledge, or any information that could be thought of as predicting your future credit performance. What can you do to improve your credit score? Experts in this area suggest that you make sure you pay all your bills on time, that if you miss a payment to a creditor, you get it current and keep it current, and that if you are having trouble paying your bills or cannot pay your bills, you contact your creditors or see a legitimate credit-counseling firm. In addition, you should keep the balance on your credit cards and other lines of credit as low as possible. And if you can, pay off your debt, and not just move it around from credit card to credit card. Do not try to increase your credit availability by opening a number of new credit card accounts. Try to pay off the balance owed on your credit cards every month. The credit information providers (Trans Union, Experian and Equifax) are not required to provide you with your credit score. However, they are required by law to provide you with a free credit report once a year. Moreover, the law requires that you be able to access these reports online. The web site for these reports can be found at annualcreditreport.com. Once you log onto this site, you will be asked to provide several pieces of personal information, including your full name, social security number, birth date, and current and previous addresses ... to make sure you are who you say you are. Douglas Hanna For FREE help with debt and credit, subscribe today to Douglas Hanna's free email newsletter "8 Simple Steps to Debt Relief" at http://www.all-in-one-info.com.
MORE RESOURCES:
Credit - Google News |
|
|
|
RELATED ARTICLES
5 Ways To Prevent Credit Card Late Fees Paying a credit card late fee is the same as throwing your money away. Late credit card payments can also hurt your credit score. Credit Help for Real Estate Financing: Five Categories of Your Credit Score 1. Payment History -- 35%The number of accounts paid as agreed and a good payment history give you a higher score. Ethical Finance: Who Benefits From Our Spending? On one hand consumers are being universally criticised for running up significant amounts of debt on credit cards, yet conversely many companies are capitalising on the growing credit card debt, from charities and political organisations to football clubs, the Association of Surgeons and somewhat ironically ActionAid, an international development agency whose aim is to fight poverty worldwide.Financial comparison site moneynet. Check Your Credit Before Shopping For That Home Loan Review Your Credit Score.Nearly every bank, credit union, and mortgage lender relies on a three digit score provided by one of the three major credit bureaus to help them make lending decisions. Understanding Your Rights Under The Equal Credit Opportunity Act It wasn't all that long ago that lenders blatantly discriminated when it came to approving credit for women and minority groups. Women were actually asked personal and demeaning questions like, how many children do you plan to have in the future or are you on birth control?Despite the fact that they were entering the workforce in record numbers, single women were often required to get a cosigner or denied credit altogether. How Businesss Mess Up Their Credit Policies In "Become the Squeaky Wheel" a book recently published, Michelle Dunn demonstrates the major areas a business should focus on to ensure a satisfactory customer experience.One mistake business owners make is not having a credit policy in place when they open their business. Credit Cards Credit cards are a form of unsecured credit. The issuer is extending you a line of credit, usually tacking on all sorts of little surprises in the fine print. Credit Counseling: Is it Really Necessary? Not everyone has a positive experience with credit counseling. Potential creditors often frown upon consumers who are going through credit counseling, denying them credit or sticking them with elevated interest rates on new lines of credit. Stop Credit Card Offers You can stop receiving credit card offers in the mail! It's really easy to do - just phone 1-888-567-8688 and follow the prompts and provide the requested information including Social Security number, date of birth, etc.Do this for every adult member of your household, including college students. Credit Cards, Merchant Accounts, and Your Bottomline Q: I'm opening a gift shop and want to be able to accept credit cards. I talked to the branch manager at my bank, but he didn't seem to know much about how it all worked. Easing Your Financial Burdens With Credit Counseling It is a well-publicized fact that more of us are getting ourselves into greater debt, and this may be true for you. The embarrassment of your financial situation can mean you are unlikely to seek credit counselling or other credit management solutions. 19,178 Identity Theft Victims Per Day - Are You One Of Them? Identity theft statistics are shocking. And we are told that it will only become worse, before it gets any better. Credit Counseling: Could it Work for Me? In the face of financial hardship, many seeking a responsible solution turn to credit counseling. Credit counseling is, all too often, the last stop before bankruptcy. Searching For A Low Interest Credit Card? These days, people need to very carefully consider what type of credit card they will carry in their wallets. There are so many options out there, and each individual has different needs. Credit Report - How to Improve Your Credit Score One of the great mysteries of life is how the three major credit bureaus (Experian, Equifax, and Trans Union) score credit. They all have secret statistical formulas for determining your credit score, but they are unwilling to divulge exactly what, exactly, constitutes your score. Convenience Can Be Costly You've just opened your credit card bill and attached to your statement you find a "convenience check" included. It may already be filled out with a dollar amount such as $300, $500, or even $1,000. What Does Your Credit Say About You? A credit report is more than just a snapshot of your financial picture; it can assist credit grantors in determining your overall risk factor. Additionally, lenders, credit grantors, and even human resource departments often use it as a tool to determine a person's character. Credit Worthiness Credit Worthiness is an important business and personal asset each person has to manage. I mean this is an asset which could make or break business relationships and interestingly in some cases personal relationships. The Right Way To Credit Repair If you have a bad credit rating, then you might find that your ability to get financing, loans, and even some jobs is greatly diminished.Once you have a bad credit rating, it might seem like there's nothing that you can do about it? but you don't have to believe that. Comprehending a Credit Report Obtaining a credit report is an excellent way to begin taking control of your financial future. It's recommended that you review your credit report once a year, not only to be aware of your standing with creditors but to also keep abreast of errors and fraud.
|
| Interesting articles | Home | site map | Link |
| © 2006 |
