Good Credit Score get Btter Interest Rate
What is a Good Credit Score?
After searching for loans you will come to know about the necessity about good credit score. The question often arises in mind what is a Good Credit Score? Although there is no where mentioned about it, the score above 700 is considered a good score. Why? Check it out….
Have you ever gone online to get a loan for you? And if you have gone then have you ever wonder that you have got pre-qualified for a loan without anyone asking you your monthly income? Have you ever wondered that how your loan can gets cleared so quickly while your neighbor is struggling for the same one? And if at all he gets it then, have you noticed that the interest rates for both loans are different?
The answer lies in your credit scoring. Credit scoring plays a vital role in determining your financial status, condition in the market. So, you often wonder what this credit score is. To get a better understanding of the benefits of good credit score let us have a close look at credit score, the factors come in to play in determining credit score and its effects on your financial credibility.
Credit Score
In general terms credit score is a number generated by a mathematical formula - algorithm. This mathematical formula works on the information provided in your credit report to compare the same information with another people using some standard comparison scale to derive credit score. This resulting number is a precise reflection of your credibility. It accurately predicts how likely you are going to make the re-payments.
With its scale running from 300 to 850, these credit scores are extensively used as a formula by many lenders to determine if you are credit worthy or not. It can be used for mortgage, a car loan, a credit card and if you are having these previously then the rates you have received are often the reflection of your credit scoring. As simple as it is - people having the higher credit scores get lower interest rates compared to the rates offer for the people having lower credit score.
Scoring Categories
Lenders and the firms offering loans use diverse credit scoring patterns to determine your credibility. As these credit scoring patterns do vary slightly in their formula giving different percentage factor to different parameters, they result in production of different credit scores from the same credit information of a person. That means credit score of a single person can be different and varied with different credit scoring models.
To bring certain kind of standardization in this process Fair Isaac Corporation (FICO), a California based company develop the first credit score using a certain standard scales for different parameters. This FICO score has been accepted by all credit scoring institution as a base platform.
The three major credit bureaus use their own version of FICO scoring model. These three companies are Equifax, Experian, and Trans Union. Equifax uses BEACON scoring model while Experian uses Fair Isaac Risk Scoring Model and Trans Union has the Empirica Scoring Model. As all these three versions of scoring models are different from each other, they come up with different credit scores.
In general, studies have revealed the American publics credit scores break out. 13 % of American public belongs to the credit score 800 and above. Nearly 45 % people are having credit score in the range between 700 and 800 while approximately 27% people contribute to the credit score ranging from 600 to 700.
Good Score
While the factors on which credit scoring varies, generally individuals with FICO scores above 700 is considered as a good credit score. Of course, there is no standardization in black and white narrating what the good score is; it is believed that the normal average borrower is having credit score in the range of 600 to 700.
A new scoring model known as VantageScore is slowly catching up as a unique scoring method for everyone as all three - Equifax, Experian and Trans Union collaborated on its development. Its scoring ranges from 501 to 990 and the scoring have letter grades from "A to F". So a score from 501 to 600 will correspond to "F" grade while a score of 901 to 990 will receive "A" grade. So in Vantage scoring system, credit scoring grade of ‘C’ is considered as good credit score.
Factors Affecting Credit Score
As per FICO scoring model more than 20 factors in five different categories are taken in to consideration to derive your credit score.
1. Payment History - One of the most important factors narrating your payment history placing the emphasis on recent activities. It accounts for the 35% of your total score. It is based on payment information on all types of accounts like credit cards, retail accounts and details on late or missed payments. It also considers pubic records like judgments, suits or bankruptcies and collection items.
2. Amount You Owe and Available Credit - This is the second most important factor about your outstanding debt. The accounts for 30 % of your total score. It considers the information regarding the amount owed on all accounts, information related to the accounts showing balances, how much total credit line is used, etc. Here one thing has to be remembered that carrying of debt does not necessary mean that you are having low credit score. In fact, people with higher scores use their credit sparingly and keep their balances low.
3. Length of Credit History - The longer you are having credit the greater will be your score. This accounts for 15 % of your total credit score.
4. New Credit - The opening of several credit accounts in a short period of time hampers the credit scoring of an individual. This accounts for 10 % of the total credit score.
5. Types of Credits in Use - This accounts for 10 % of your score and considers your mix of credit types and the total number of accounts you have.
Although Credit Scores vary with different scoring methods, it provides a standard platform to gauge your credit worthiness. And even it is not clear that which number can be considered as a good credit score for a specific purpose, it is always advisable to keep your score higher than 700. it can be explained in a much better way by giving this example. A person carrying a score of 625 can be scrutinized for mortgage lending but at the same time the same score can be well enough for getting a car loan. So brace yourself to achieve that 700 - 720 mark and you will taste the fruits!
Repairing Your Credit Score and Clearing Derogatory Marks on You
It is extremely important to get your credit score cleared before you attempt to get prequalified for mortgage. Here are the steps you should take:. First of all, if you are in contact with a loan officer
Being out of sync, moving and credit scores.
A good friend of mine and her dh just bought a home for $105000, a foreclosure, and both of them have bankruptcy on their credit. She said, you only need to be 3 years out of bankruptcy to get a loan.
Credit Score | Good Credit Score
What does your Credit Score mean? How do I qualify for a home loan? Can I do anything to get a good credit score?
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What Lenders Look For: Good Credit Improves your Mortgage Negotiations. Contrary to what you may think, you don’t manage your credit applications and payments in a vacuum. Your credit behavior (as some have learned the hard way) is tracked by credit … When your Credit Score Become Important? Have you ever wonder why your online application for credit can be approved in 60 seconds? Or get pre-qualified auto loan for a car without.
How To Get The Best Home Improvement Loan Rate | Make Money | Save
If you’re told that your credit score is too low to secure a good home improvement loan rate, ask for advice on how to improve your credit score; Make visits to the lenders’ offices and ask to to talk to a loan officer. Ask about how to get pre-qualified for a home improvement loan; Don’t make any commitments to any particular lender until you’ve gotten at least half a dozen separate quotes, just state that you’re comparison-shopping so.
| By Jayashree Pakhare Published: 3/29/2007 |
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