What Is A High Credit Rating,
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Easy Tips
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Thursday, 19 July 2018
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Credit Tips
A low credit rating will cost you significantly over time, while a high credit rating can save you considerably in the future. The Fair Isaac Corporation started the credit rating system in 1958, developing an algorithmic way of predicting credit value based on a borrower’s previous credit history. Over time the credit system grew in popularity. As of 2009, lenders from across the world employ adaptations of the original credit formulas to determine, with better accuracy, which individuals are most likely to return payments on a loan or credit. Your credit rating depends on the value of your credit score.
In the FICO system developed by Fair Isaac and Company, credit scores range from 300 to 850 points, where 750 or higher represents good credit. Fifty percent of borrowers fall in the “good” credit range according to the FICO website. The exact value that puts you in the category of “high credit rating” varies according to sources. The “Reader’s Digest” article suggests ways to impact the factors affecting your credit score in order to improve your ratings.
To start with, set up automatic payments on credit cards and loans. Borrowers who never miss a payment have higher credit scores. Secondly, use no more than 9 percent of your available credit. Payment history and percentage of credit debt affect 65 percent of your score. Undeniably, higher credit ratings earn you the lowest interest rates on car loans, home mortgages and credit cards.
Furthermore, higher ratings help you tap into the credit cards with the best rewards programs. For example, according to the “Newsweek” article, you can earn up to 5 percent cash back on all grocery and gas expenditures while racking up another 1.5 percent on all other expenses if you know where to look.
Even certain insurance agencies will lower your rates based on your credit rating--a high credit rating indicates you are responsible with your fiscal decisions which many agencies generalize to your everyday life. Lose Weight. Feel Great! AGE lbs. WEIGHT ft. How Do Medical Bills Affect Your Credit Score, NewsArticle","headline":"What Is a High Credit Rating,
A hard check takes place when a lender checks your credit report to judge whether or not he should approve your loan application. A hard check does lower your credit score considerably. However, when you yourself check your credit report, i.e. do a soft check, your score does not decrease drastically. In fact, most experts advise people to check their credit reports frequently so as to avoid any discrepancies and possible frauds. Myth: Closing a credit card after paying the debt will improve credit score.
Fact: It has been reported that a majority of people default on their credit card payments, and this has a profound effect on their credit score. People think that by paying off the debt on their credit card and closing it once and for all will improve their credit score.
However, the fact is that, one of the factors credit rating agencies look at while preparing a credit report is the amount of credit available to an individual. More the available credit, better the score. So if you have paid off all the debts on your credit card(s), a wise decision would be to destroy the card(s) while keeping the account(s) open, so that it helps in building your credit score.
Closing your credit card will have no effect on your available credit, therefore, it will be inconsequential in improving your credit score. Myth: Taking the help of a credit counselor will lower your credit score. Fact: Getting a reputed, credit counseling agency to help you out with your finances isn't looked at negatively by credit rating bureaus. However, when you enter into a settlement with your creditors on the balance that you owe to them, it is up to their discretion whether or not they report it further.
Myth: Once you get a poor credit score, it is impossible to get a loan. Fact: Credit score is just one of the parameters that lenders look at while reviewing the loan application of an individual. Lenders look at other factors too, such as annual income, age, job history, debt load, etc., while considering a loan application.
Although the credit score plays a very important role in credit requests, it may be still possible for an individual to get a loan with a relatively lower credit score. Also, credit scores change positively or negatively with time, depending on how well a person manages his debts. If you have been handling your finances in an efficient manner for a long time, there is a high possibility that it will reflect positively in your credit score. Myth: Minorities are often 'given' poor credit scores.
Fact: This is a rumor that has been doing the rounds on the Internet, especially on poorly-moderated forums and message boards. As mentioned before, credit score is a statistical figure that is indicative of the credit history of an individual. A credit report doesn't take into account the race or ethnicity of an individual. Therefore, there is no reason to believe that minorities are unfairly targeted by credit rating agencies.
Myth: People who pay their utility bills on time have good credit scores. Fact: Sadly, paying your utility bills on time has little or no effect on your credit score. Reason - your cable or gas company do not offer you credit. You simply use their services and pay them for what you have used. On the other hand, if you do not pay your bills on time, these companies can report your case to the credit bureaus, leading to a decrease in your score. Myth: You can improve your credit score immediately by settling old debts.
Fact: Paying off old debts is definitely a step in the right direction, but one should not expect it to work wonders overnight. In fact, it has been reported that even after paying off old debts completely, it takes around seven years to get it off your report. In case of bankruptcies, the period is around ten years. Myth: The best way to improve your credit score is to pay with cash.