I am trying to establish good credit (is there even such a thing). I was curious about WHAT exactly matters when a credit score is considered. The ‘secret recipe’ is still in the dark. However, the pie chart shows what is actually considered in the credit score.
About 85 percent of the population has credit scores in the 500-800 range. 60% have a score above 720 (the best of the best) and get the best interest rates. Big deal you say? Just one point can cost thousands and thousands of dollars in interest rates. If you do not believe me, see for yourself using the Fair Issacs loan calculator! I find it interesting that the score only considers transactions made previously and a ‘tarot reading’ of the predictability that you will probably pay your loan back. It does not consider how much income you receive, where you live, interest rates from other accounts, and age.
This could potentially mean that a 23 year old recent college grad could receive credit cards a billionaire could not even get. That is just crazy. No one knows what scores mean what and it feels like a gamble. Sometimes I feel that if I just glance at a credit card it will affect my score! Thanks to the Fair and Accurate Credit Transaction Act of 2003, we have a right to know our scores. Before that, people could not even find out what their score was. Call that crazy - seeing that a credit score means so much and has so much affect on everyday life.
It is wise to know how credit scores are factored, and to be knowledgeable about the process because it can save lots of money over time. Lets say you have just received your less-than stellar credit score... you can make some improvements as outlined by the FICO folks themselves:
- Pay your bills on time!
- Stay current - the longer bills are paid on time....the better your score
- Keep low credit card and revolving credit balances
- Pay off debt
- It is perfectly find to request and check your credit report
- Manage credit cards responsibly (nothing wrong with having them)
- Contact a credit counselor if you are having financial trouble
I am going to continue researching about credit scores because I want to be in the top percentage - above 720!
More information and details regarding this blog can be found at http://www.myfico.com/
No comments:
Post a Comment