How To Improve Your Credit Score Rating
You have probably heard of credit scores and ratings but if you are like most people, you probably do not have a good feel for what a credit score rating really means to you. The problem with this is that what you don’t know can hurt you and negatively impact your financial status. The information is not a secret and you should take the time to find out what your credit score is, and as is possible in almost all situations, put forth the effort to improve your credit score rating. This is frequently also called a FICO score based on the company that developed the formula to create the scoring system.
Your credit score has an impact on just about every aspect of your financial life, and having a score that is calculated lower than it really should be has a negative impact on you. When your score it high, your credit rating is also high and you typically have little problems in getting approved for loans and new credit. The higher the number, the better qualified you appear to be to potential lenders.
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.
It should be your goal to raise your credit score and there are many things you can do. First and foremost, pay each of your bills on time every month, which will establish a good payment history. For your credit cards, keep your outstanding balance well below your credit limit, ideally around 30% of your credit limit or less. Take care to never exceed your credit limit. Do not open a bunch of new accounts over a short period of time, since this type of activity is easily seen on your credit report.
The effort you put forth to improve your credit score rating will not go unrewarded since you will find many more doors opened for you when you have good credit. Understand what your credit score is and take the steps to improve it today.
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