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Credit Scores - what are they?
- 2. Everyone has one, but few know how they got it. It can move up and down, but never side to side. If you destroy it, it may destroy you. You may ignore it, but it never ignores you. It can be ruined quickly, but may take years to fix.
- 3. What are they to you? *
- 4. * Credit Debt APR Term Fees is something borrowed, with the understanding that it will be repaid later. is the entire amount of money you owe to lenders. is the total cost to use credit in a year. is how long you have to repay a loan, often expressed in months. are charged to use credit. Examples: Annual Credit Card Fee, Loan Origination Fee, Over-the-Limit Fee
- 5. * Credit History Credit Report Credit Score Universal Default Bankruptcy is a record of your behavior related to borrowing and repaying loans. is a detailed record of your personal credit and financial transactions. is a rating used by credit reporting companies to help lenders decide whether and/or how much credit can be extended to a borrower. allows a credit card company to increase your interest rate if you make just one late payment. is a legal process to get out of debt when you can no longer make all your required payments. And should only be used as a last resort.
- 6. *A credit score is a three digit number calculated from your data-rich credit report and is one factor used by lenders to determine your creditworthiness for a mortgage, loan or credit card. *Your score can affect whether or not you are approved as well as what interest rate your are charged. Creditkarma.com *
- 7. * *This is a complex algorithm that takes information from your credit report. *The higher the number, the lower the credit risk.
- 8. * *FICO stands for Fair Isaac & Company, the primary company who provides scores to 90% of the top lenders. *The FICO scores range from 300-850. *You have three FICO scores, one for each credit report provided by Experian,TransUnion & Equifax.
- 9. * Payment HistoryAmounts OwedLength of HistoryNew CreditTypes of Credit Used
- 10. * * Length of credit history * Payment history * Types of credit in use * Number of times credit was declined * Requests for new credit * Current total debt
- 11. * Spending up to the limit on my credit card. Missing a payment on my credit card. Paying my cell phone bill 3 days late. Overdrafting my bank account. Not paying my cable bill. Applying for a loan with 5 different banks.
- 13. * *If you need a loan, lenders will pull a version of your credit score. *They use it to decide if you should be approved, and also what interest rate they will charge you. *The better your credit score, the LESS you will be charged!
- 14. * *For example: *You are purchasing a $20,000 car and want a 5 year loan. *If your credit score is over 760, your monthly payment could be $359. *If your credit score is below 610, if you are approved, your monthly payment could be $431. *You could pay $4,320 more for your car if you had a low score! (And that’s only for a $20,000 loan!)
- 15. * *You are purchasing a $250,000 home and want a 30 year loan. *If your credit score is over 760, your monthly payment could be $1193.14. (4.025% APR) *If your credit score is below 650, IF you are approved, your monthly payment could be $1410.05. (5.481% APR) *You would pay $78,087.60 more for your home if you had a low score!
- 16. * *How much debt do you have compared to your income? *Do you pay your bills on time? *If you keep your debt levels in line with your income and pay your bills on time you will have a good credit history and score.
- 17. * Installment Credit •Fixed Payments •Set period of time to repay •Interest rates set or not. •Example: Car & Home loans Revolving Credit •No stated payoff time •Minimum monthly payments •Interest rates vary or not •Finance charges •Example: Credit Cards
- 18. * *“It Depends.” *Credit score developers (like FICO) don’t reveal the exact point deductions. *The weight of the activity can vary for different credit histories. Bankrate.com
- 19. * *Consumers have the right to one free credit report annually, however not to a free credit score. *More than the score, check the credit report to make sure all the information is accurate. *Annualcreditreport.com
- 20. * *Everyone makes mistakes. *Negative information is mostly off of your report after 7 yrs. *Older information carries less weight, so start making all of your payments on time, even if you didn’t before. *It takes a long time to repair a credit score, be patient and diligent. It will pay off.
- 21. *Although this sounds like a good solution, if you EVER need to apply for a loan, this will affect you negatively. *No credit can be viewed as similar to bad credit. *The only way to get the best rates and be approved when you DO need a loan is to have credit cards and installment loans with good payment history. *
- 22. * *Pay your bills on time. Delinquent payments and collections can have a major negative impact on your score. *Keep balances low on credit cards and other “revolving credit.” *Avoid applying for new credit unless absolutely necessary.
- 23. * *Pay off debt rather than moving it around. Don’t close unused cards as a short-term strategy to improve your credit score. *Owing the same amount, but having fewer open accounts may LOWER your score. *There is NO QUICK FIX in improving a bad credit score.
- 25. The 3 C’s of Life: Choices Chances & Changes You must make a choice to take a chance or your life will never change.
Editor's Notes
- Everyone has one, but few know how they got it. It’s not something you can’t touch, but you can definitely feel it. It can move up and down, but never side to side. If you destroy it, it may destroy you. You may choose to ignore it, but it never ignores you. It can be ruined quickly, but may take years to fix.
- Everyone has one, but few know how they got it. It’s not something you can’t touch, but you can definitely feel it. It can move up and down, but never side to side. If you destroy it, it may destroy you. You may choose to ignore it, but it never ignores you. It can be ruined quickly, but may take years to fix.
- Everyone has one, but few know how they got it. It’s not something you can touch, but you can definitely feel it. It can move up and down, but never side to side. If you destroy it, it may destroy you. You may choose to ignore it, but it never ignores you. It can be ruined quickly, but may take years to fix.
- Payment history: (35 percent) -- Your account payment information, including any delinquencies and public records. Amounts owed: (30 percent) -- How much you owe on your accounts. The amount of available credit you're using on revolving accounts is heavily weighted. Length of credit history: (15 percent) -- How long ago you opened accounts and time since account activity. Types of credit used: (10 percent) -- The mix of accounts you have, such as revolving and installment. New credit: (10 percent) -- Your pursuit of new credit, including credit inquiries and number of recently opened accounts.
- Answer: Number of times credit was declined.
- Within a scoring model, there's more than one formula used to calculate a score, and each formula is designed for a category of consumers with similar credit profiles. The information in your credit report determines which formula is used. If you are new to credit, for instance, the scoring model will put you into a category for people with young credit histories, and use a scoring formula specific to that group.