Myths About Credit Scores - Don't Make These Mistakes

While providing a loan to any customer, a variety of factors are taken into consideration by lenders. Some of these include the income of the applicant, employment history, fixed and liquid assets, and credit limits. Apart from these, another prominent factor that determines the decision of a lender is the credit score of an individual.

A credit score determines the repayment capacity and the credit history of the customer. Hence, it is very important to have good credit scores. However, there are certain myths that many people carry in their minds regarding credit scores.

Myth 1: Credit counseling hurts credit scores

As per the revised calculation of FICO scores, credit counseling does not have any relation to credit scores. This is because, not everyone having a credit counseling session defaults with their loan repayments. In fact, a credit counseling session is an effective debt management strategy. A credit counselor does have reasonable solutions to help bail you out if you face any financial problems. However, many lenders do not like the idea of financial counseling. They consider it to be equivalent to Chapter 13 bankruptcy. Hence, a good credit customer should always keep away from a credit counseling session so as to ensure a mortgage loan with better terms and conditions. Credit counseling can affect credit scores in an indirect way. If the credit counselor does not send the payments on time, then the loan is reported to have carried late payments, a factor that has a major influence on credit scores.

Myth 2: FICO score is not the only score to check

In the US, credit scores are actually reported by the three major credit bureaus that include Equifax, TransUnion and Experian. Each one of these has a different way of calculating the credit score of an individual. While Equifax presents a credit score in the form of FICO or Beacon credit score, TransUnion presents it in the form of Empirica. At Experian, the scores are calculated based on the "Experian /Fair, Isaac Risk Model". It is up to the jurisdiction of the lender to decide which credit bureau should be contacted for getting the credit scores of a customer. The credit data provided to one credit bureau is not shared with another. Hence, lenders opt for all the three credit reports and determine the credibility based on an average score. A smart customer is one who fixes errors and clears misunderstandings in all the three credit reports before shopping for a loan.

About Author: Pauline Go is an online leading expert in finance industry. She also offers top quality financial tips to investor like:
Refinance Car Loan People with Bad Credit, How To Calculate Credit Score, Methods Used To Establish Credit Limits

Article Source: http://EzineArticles.com/?expert=Pauline_Go

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How to Interpret Credit Score Ranges

by Ann Richter

Your credit score ranges are an important asset, and it is vital that you treat them as such. Without careful attention, it is possible for your scores to drop to the point where it would be almost impossible for you to acquire a loan of any sort. Why is this? Almost three-quarters of lenders pay close attention to your credit score when you apply for a loan. More than anything else, these scores affect what sort of loan terms and interest rates that you will be able to obtain, for the scores are the only "you" that a lender will see. Never underestimate the importance of your credit record, for it determines many other important things, such as:

• Mortgage types available when you buy a home • Down payment amounts • Car Loans • Insurance premiums • Whether or not you will be hired for a job you are seeking

Of course, in order to be able to interpret your credit worthiness score, you have to have a copy of your credit report, which you can get by contacting one of the "big three" credit bureaus. Once you have this report in hand, it’s time to look at your stats and see how you stand.

How High Can A Credit Score Go?

Credit scores can range from a high of 850 to a low of 300. Of course, the higher the score, the more likely you are to get a great interest rate and approval for a loan. With a score of 700 or above, most lenders will see you in a very favorable light, for your credit to be considered in the category of Excellent to Very Good. Depending on how much over 700 your score is, some lenders will offer you even better rates than the 700 and below score crowd receives.

A score of 680 to 699 means that your credit is considered to be Good. You aren’t considered as a credit risk with this score, but you won’t get offered the lowest of interest rates like those with higher scores.

The range of 620 to 679 is considered to be OK. It’s not low enough to get you denied for a loan, but you will definitely not have the best terms.

A score of 580 to 619 is considered to be Low. With this low of a score, you are teetering on the edge. You are almost at the point where you can’t get a loan at all. Loan officers will manage to work with you, but the loan will definitely be more expensive for you in terms of interest. And, you won’t have much of a choice, as if you want the loan, you’ll have to pay the price.

The range of 500 to 580 is considered to be quite low. If you are in need of a loan with a score this low, you will only be able to get a specialized type of secured loan tailored to people with bad credit.

If your credit score ranges between 499 and 300, you really should consider credit counseling or a debt management program. But, take heart - with a little diligence, you can raise your credit rating and improve your credit report.

About the Author

Not sure what your credit score is? No problem, find out how to obtain free FICO scores by visiting http://www.creditreportguideonline.com, a popular credit report site that provides advices, tips and resources including information on how to get a credit card with no credit check .

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Best way to improve credit score

If you have ever had a loan denied it was probably humiliating, embarrassing, and a harsh reality check. So much for that bright red Mustang convertible you wanted. Or maybe it was for an old, beat-up, rusty sedan you thought you could afford to drive back and forth to work. Sadly, that new five bedroom, brick home with the sun porch is out of reach. Or was it your last hope for a deposit to rent a simple one bedroom apartment for you and your family. Some people know before they ever apply for a loan that they will be denied due to a poor credit rating. Others are completely surprised to find out their credit history is hurting. How does this happen?

Sometimes it's just a lack of discipline or good organizational skills. This leads to poor paying habits and late payments which can damage your credit. Sometimes it's temporary circumstances beyond your control such as a job layoff, divorce, illness, etc. You are forced to choose between putting food on the table and making a credit card payment. That's a tough one. Thankfully, there are ways to improve your credit rating with a little effort. The following five tips can help.

1. Often, a big part of your credit score depends on your debt to credit ratio. I'll give you an example. If you have a credit card with a $1000 limit and you carry a $900 balance this would make the percentage you owe to the percentage available 90%. On paper it would look like you were in a credit-tight position. There are three ways to improve this.

A)Apply for another card. Whatever the limit is becomes part of the calculation. If it is $1700 you now have a total limit of $2700. This brings your ratio down to 33% ($1000 original credit + $1700 additional credit divided by $900 balance=33%). That's a big difference. B)You can do the same thing by asking your current credit card company to raise your limit. C)Pay down your current balance. Make it a priority!

2.Always try to pay your bills on time. Chronic slow or late payments lead to denials or approvals with ridiculously high rates. If you just can't seem to remember when to pay bills try using a personal planning calendar, PDA, or numbered folder. I use a folder that has multiple dividers numbered 1-31 for each day of the month and additional dividers for each month. You can get these at office supply stores. File your bills in the divider where you will see them the week before they are due. Check the folder daily.

3.Get a copy of your credit report and contact the credit bureaus if you find errors. Ask to have them removed.

4.If you have a credit card for every store you have ever entered....cancel some! No one needs fifty retail credit cards. Retail cards are sometimes viewed less positively than bank cards so get rid of them first.

5.Piggyback on the good credit of a friend or relative. Have them add you to their account (but don't use it). Once you're on, ask the creditor to report this account to the credit bureaus. Be careful with this one. Don't abuse the goodwill of your friend or family member by using the account without asking first!

In our credit-driven society it's way too easy to bite off more than you can chew. Throw in a couple of life's little emergencies and you can quickly get into trouble. The tips here can be helpful, but I suggest you don't just use them for temporary gain. If you go to the trouble to improve your credit, go to the trouble to keep it good. Look at your habits and try to change them if necessary. I know this is a tough one that we all have trouble with, including me. Hope this helps.

About the Author

Bob Armstrong is the Owner of DebtPuzzle.com which shows you the Best way to improve credit score.

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How To Meet Credit Card Application Requirements

By Bjoern Noth

Applying for a a new card is relatively easy, especially with the Internet. But getting approved is a different thing altogether. Many credit card companies are now placing more stringent requirements from their applicants. One of these requirements is a good credit rating or a high credit score.

Unfortunately, a good credit standing does not come instantly. It has to be worked on with determination and persistence. But hard work usually pays off. Once a person has established a good credit standing, getting approval for an application becomes far easier.

Establishing a good credit rating is the best initial step to meeting all credit card application requirements. But how can you get a good credit rating? Here are three suggestions that have been found effective.

First, pay your bills on time. The companies always check a person's credit score before approving a credit card application. To prevent that credit score from taking a nose dive, all bills must be paid on time.

Problems happen and sometimes the bills are paid late. This does not mean that a credit card is way out of your reach. All that is needed is to start paying bills on time. After several months of paying on time, the credit score will significantly increase.

Second, keep your current "plastic money". With bills that don't seem to decrease, the most logical thing to do, it seems, is to cancel the card. But this is an unwise move. The presence of a credit card contributes to the credit score. A card implies that there are funds that can be made available to the credit card holder.

The recommended thing to do with the credit card is to keep it but not use it, while still paying the large bills. Once bills are paid, the credit standing becomes better. It also becomes possible to get approved for another card, which will further increase the credit score.

And third, avoid maxing out the credit limit of the current plastic. Credit scores are known to decrease if the credit card is charged with more than 50% of its limit. By keeping way below the credit card limit, the bills are more manageable. If the bills are more manageable, the credit standing becomes better. And if the credit standing is excellent, it will be easy to meet the requirements for a new credit card.

The author believes the best place to apply card credit online is here!

Article Source: http://EzineArticles.com/?expert=Bjoern_Noth

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Ways to Improve your Credit Score

BY: Jon Arnold

If more consumers realized the wide range of areas of their lives that are affected by a credit score, there would be a lot more people taking pro-active steps to watch their credit score. A poor credit score can affect your job, your chances of promotion, and even via some recent legislation, affect how much you pay for your car insurance. Based on all these areas of your life affected by your credit score, it would seem prudent to want to do whatever you can to keep your credit score as high as possible at all times.

Most consumers seem to think that their bad credit will clean up over time. While this is true to an extent, what happens if you need to get approved for a loan or a new line of credit somewhere before time has taken its course? The answer is that you either do not get approved, or you end up getting approved but at a much higher rate of interest that you would have had to pay if you had taken steps to clean up your credit score yourself.

One of the mysteries about cleaning up one's credit history is that it does not require an expert or an outside company. Although there are many such companies around willing to charge a fee for their service, most consumers do not realize that those companies cannot do anything that the consumer could not do himself. Those companies cannot offer any kind of guarantee that the consumer could not offer himself either. Like anything else, however, it takes the time, effort, and discipline to just sit down and do it.

If you are self-employed, use your business line of credit. If a credit card is listed in the business name, then the financial transaction will appear on the business's credit report, not on your personal one. This is a good idea anyway, since whatever you can purchase in the name of your business is a much more likely candidate for a tax deduction.

A lot of people seem to feel good about themselves because they have literally dozens of open accounts, usually a combination of Visa and MasterCard accounts, a couple Discover cards, maybe an American Express or two, and several department store charge cards. They don't feel bad about it because they claim that almost all the accounts have a zero balance. This is still not good, according to the most recent studies of the systems that compute one's credit score, because the banks realize that one could go out and charge all those cards to the hilt. It seems the optimal number of open credit card accounts is about 5 or 6 accounts.

With the accounts that you have open, do your absolute best to keep the outstanding balance to less than 30% of your credit limit. This seems to be the optimal percentage where you have plenty of credit available, yet you are actively using the account without being in danger of exceeding your credit limit.

Finally, keep on eye on your credit report. Gets a copy of your credit report separately from each of the three credit reporting agencies, because they each have an independent view of you and your credit history. Chances are better than excellent that there are errors on your credit report, and it is up to you to dispute those errors and have them removed from your credit report, where the end result is a higher credit score.

Don't take your credit score for granted. Your credit score is used in more places in today's world than you realize, and keeping it in as good a condition as possible should be your goal.

About the Author:

For more insights and further information about How To Raise Your Credit Score as well as getting free copies of your credit report, please visit our web site at http://www.credit-help-center.com

Source: http://www.articlesbase.com

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Rewards Credit Cards: 5 Things You Must Know

Two good sites to search for credit cards are "CreditCards" and "ConsumerCardReport". ConsumerCardReport specializes in providing insightful guidance to consumers. CreditCards lists the most offers, but none of the extra cards seemed worth recommending.

There are a few fairly simple precautions that consumers should take when using rewards cards:

1. Pay it off each month. The interest rate on rewards cards is usually higher than on other credit cards, so make sure you pay the balance in full every month.

2. Avoid late fees. These can be as high as $39, so make it a habit to pay the credit card bill soon after receiving it -- don't procrastinate.

3. Don't overuse it. Some people are tempted to buy more stuff with their rewards card in order to increase their rebate, which can pile up unnecessary expenses. If you don't think you can control your spending, don't get the card! Some rewards cards will pay you a higher percentage as you spend more money, for example a card may pay 0.5% for the first $5,000 you spend and 1.5% afterwards. This encourages excessive credit card spending, which is why we don't recommend such cards to most people.

4. Make few applications. If you apply for one credit card your credit score will be fine, but as you apply for more cards lenders become more concerned that you may be having money problems. So the more cards you have applied for in the previous six months, the more your credit score will be decreased. After six months, your credit score returns to normal. Our recommendation for most consumers is to make no more than two card applications; but if you plan to get a mortgage or major loan in the next six months, make only one application.

Be aware that the number of credit cards you actually possess won't harm your credit score. More cards may even improve your credit score by increasing your credit-to-debt ratio. In particular, it's wise to maintain your card balances at less than half of your spending limits for those cards.

5. Check the terms. The most reliable description of a card's terms is listed alongside the card application. Although terms can sometimes change, major changes are usually rare.

While the best ways to save money will always involve old fashioned cost-cutting, obtaining a rewards credit card is still a good way to give yourself a virtual raise.

Source: Free Articles

About Author

David R. Snell is the founder of the Consumer Freedom Alliance (CFA) and webmaster of its flagship site, SmartConsumerTips.com. He offers excellent advices and great tips regarding all aspects of Rewards Credit Cards. While you are there, DO NOT forget to grab your own copy of "The World's 8 Best Consumer Tips" and save hundred hours of research.

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Getting Credit Repair After Bankruptcy

When people live in a free market economy like America, good and bad can result as a direct consequence of people's actions. Some people may mass large sums of money while others may become bankrupt.

All is not lost if you have made some bad decisions with your credit. If you have declared bankruptcy, your slate is clean, but your credit score will suffer. By taking steps to improve your score, you will end up saving a lot of money if you get a mortgage or car loan.

It's probably best to not try for credit for awhile except maybe a secured credit card. The reason is because the credit score is low and there will be turndowns showing on the credit report. It will stay low as long as you continue to try to get new credit and get rejected. It is better to pay cash for needed things unless there is an emergency.

Credit repair after bankruptcy can take as much as ten years to complete. This may seem like an unfair amount of time to wait for better credit but people shouldn't forget that all of their debt was erased and this is a consequence of filing for bankruptcy.

Some Steps For Credit Repair After Bankruptcy

You have a fresh start, so it is a great time to evaluate where you are financially. I know it sounds boring, but you need to understand how much you make and where you spend it. You should make a budget if you want to really take control and see some real financial progress.

The second thing that people can do is to change their lifestyle. This means no buying on a whim. Really plan your purchases. This includes paying yourself first, by putting money away for your future financial goals like a house, college for your kids, and retirement. Then live on the rest. You can have an amount for impulse buys, but use cash only for them.

If impulse buying is a problem, develop a way to stop this type of impulsive buying. One way to develop good spending habits is to wait a day and see if it's still something that's necessary to buy. Many times, just waiting a day changes impulsive spending. Credit repair after bankruptcy will help people to become stronger financially and less likely to fall into a new credit problem.

Lastly, find a spiritual outlet. Get in touch with that part of you that knows more things won't bring you lasting satisfaction. As you resolve to live more genuinely, and treat your finances more maturely, your credit will automatically improve after your bankruptcy, and before you know it, your credit score will be back toward normal.

When people live in a free market economy like America, good and bad can result as a direct consequence of people's actions. Some people may mass large sums of money while others may become bankrupt.

Paul McDermott reveals more about his experience with credit repair after bankruptcy and other credit and debt issues at Credit Repair. Learn about his mistakes so you can avoid them.

Article Source: http://www.eArticlesOnline.com

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Improving Credit - Tips & Advice to Improve your Credit Score

By David Zwierecki

Building and Rebuilding your credit does not have to be nearly as hard as it sounds. In order to maximize your credit scores and build or improve your current credit you need to first understand how the credit scoring system works.

Here are some quick tips on improving your credit score that you can do all on your own:

This is the most obvious of all of the tips but you need to start with making all of your payments on time. Make sure you pay your co-pays for insurance bills at the doctors office and/or hospital so that they do not eventually find themselves in the collections department and reporting as a blemish on your credit report. This is one of the most common types of collections that report to consumers credit reports.

Never borrow over 50% of the maximum credit limit on your credit cards. It is even better if you can keep the balances under 30% of your maximum credit limits. Maxing out your credit cards, or even worse, going over your credit limit can have almost as negative affect on your credit report as late payments.

Maintain a good balance of credit. For example 1 auto loan, 2 credit cards and 1 mortgage loan would be a good balance of credit. If you were to have 10 credit cards only and no other credit, this would not be a good balance/mixture of credit usage.

Limit the number of total inquiries you have against you. This simply means do not apply for every type of credit that you can. Do not sign up for new credit cards at every sporting event or mall kiosk that you see so that you can get the free gift. Too many inquiries can have a negative impact on your credit score.

Try piggybacking credit off of a friend or family member. This is a method of having a friend or family member add you one (or more) of their credit cards as an "AUTHORIZED USER," not as a co-borrower and you can instantly gain their credit history from that credit card. Not all credit card companies will report this to your credit but many of them will. You must make sure the individual has a good payment history and is not over-extended on that credit card themselves for you to receive maximum benefits from this. Also a credit card with a long history will be much better for you to be added to.

If you are new to credit the easiest credit cards to obtain are usually department store credit cards, such as JCPenny, Sears, Kohl's, etc... Also, Capital One and Household Bank are very easy to obtain credit cards through as well.

Therefore, just because you have credit cards does not mean you need to use them. Use them very sparingly and preferably only once in awhile to demonstrate a responsible payment history. Follow the tips above and the tips on the link above in order to improve or build your credit.

The author of this article, Dave Zwierecki, has over 10 years of experience in the credit and mortgage lending fields. http://www.gofirstsecurity.com

Here is a great link on credit building/rebuilding and how credit scoring works: http://fshomeloan.com/index_files/mortgageblogger.htm

Article Source: http://EzineArticles.com/?expert=David_Zwierecki

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