How to get the best credit score and how does this benefit the consumer?
Establishing and maintaining a good credit history has never been as important as it is in today’s America.
"The man who never has money enough to pay his debts
has too much of something else."
- James H. Aughey |
You need good credit in order to get good rates when you finance a home or car. Your credit score numbers may also help determine whether you are hired for a job, find a decent apartment or get reasonable rates on your insurance.
Your credit score is statistically calculated and summarizes your credit information and history via a credit score report.
This overall score indicates the likelihood of you becoming delinquent on a loan or reneging on a credit obligation.
Even the smallest error in the credit score explanation - a single late payment or accidental default due to lost statement can cause your credit score to nose dive.
Lenders use your credit scores to evaluate their potential risk if they decide to lend you money. It helps them to determine who qualifies for a loan; what interest rate to charge and the credit limits to set. They ideally want to lend the most money to those with the best credit score reports.
These credit providers are looking for the best credit score borrowers to ensure a safe and secure portfolio. Your credit score information tells the lender that you are able, and most likely, to pay back the loan or the credit card they issue.
If you choose to use credit, you should be careful to establish and maintain the best score possible, which can save you thousands in interest payments over time.
Sadly, scores on a credit score chart have now become the basis on which people are judged in a variety of ways. Someone with the best credit score could pay as little as 5.0% for a 30-year fixed-rate mortgage. The same loan would be approved at only 10.5%, to someone with a lower credit score.
In general, a FICO credit score between 650 - 700 is considered a good credit score. People with a credit score in the range of 700 or higher have a much better chance of getting approved for loans at the lowest interest rates.
Scores below 650 may point towards trouble areas that creditors want to look at. These consumers may be required to produce additional documentation before a loan is approved. While consumers may still be able to obtain a loan, it may take more time and be more involved. Creditors consider these low credit score rankings to be an indicator of a higher credit risk.
If you are just starting out in the world of finance, it's important that you carefully maintain a positive credit history and ensure that you earn the best credit score prior to applying for any kind of credit. Just remember that the two most important factors affecting your credit score are timely payment of your credit accounts and the percentage of available credit that you actually use.
It is essential for you to pay every single one of your bills on time, every time. All it would take would be one single missed or late payment and your credit score will continue to reflect your mistake for as long as seven years.
To ensure you maintain the best credit score: Never max out any of your credit card accounts; limit credit use to below 30% of your overall credit limit; and don't carry a balance on a credit card more than 30 days. Pay it off each month to avoid paying interest.
The absolute best approach to personal finance is to avoid using credit at all. If possible, live totally debt free and avoid having to worship at the alter of the FICO. Life’s too short to have to spend so much time and energy trying to run through the continuous obstacle course that FICO creates. When living debt free, zero is absolutely, without a doubt, the best credit score you could possibly have.
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"Eighty percent of success is showing up."
- Woody Allen |
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Debt is NOT your friend. It's not a wonderful "tool" for building wealth. That's a myth.
