Did you know there was a time when there was no such thing as a credit score? Any time you applied for a mortgage or a personal loan, the lender would check your credit record. But there was no easy way for either the lender or you to see how good a risk you were for new credit.
Then along came credit score
Somewhere in the 1960s the company that was then known as Fair Isaac Corporation pioneered credit risk scoring. What this amounted to without getting too technical is that the company developed an algorithm or mathematical formula that could translate your credit reports (analog information) into a digital number. Today, the first thing a potential lender will look at is your credit score as this is much simpler than reviewing your complete credit history, which could be 12, 14 or even more pages long.
Credit score range
Credit scores range from the odd number 300 to 850. As you may know, the higher the credit score the easier it is to get credit. Conversely, if you have a low credit score of 620 or less you may have a difficult time getting credit. In addition, you’ll pay a higher interest rate on the money you borrow whether it’s for a mortgage, a personal loan or an auto loan. You will even pay more for auto insurance and life insurance because most insurance companies will base part of their premiums on your credit score.
Tip #1.Your credit score is based on a number of factors but there are three that most financial experts say are most important. First, about 30% of your credit score will be based on how much debt you have outstanding. There is a thing called the debt to income ratio. You can calculate this yourself by adding up all your monthly payments and dividing the total into your monthly gross income. If your debt to income ratio is 51% or higher, this will negatively affect your credit score. So the first thing is you should do to increase your credit score is get rid of some of your debts so that your debt to income ratio falls below 50% or even better below 40%.
Tip #2, this might seem odd but it’s not a good idea to close any credit accounts as 10% of your score is based on this. You might pay down one of your credit cards to a zero balance or just a few dollars but the experts will tell you to not close the account.
Third, 10% of your credit score is based on how many times you apply for new credit. So tip #3 is don’t apply for a lot of new credit. Lenders such as credit card companies may check your credit score before they send you one of those preapproved credit cards, but the credit reporting bureaus understand this and don’t treat these requests the same as those you initiate yourself.
When you find yourself submerged in debt
If you have a bad credit score because you’re drowning in debt, we can help. Our debt relief providers will work with your creditors to get your debts reduced significantly–probably to a fraction of what you actually owe–plus, there is a simple 100% satisfaction guarantee. We’re so confident that we can help you achieve your goal of becoming debt-free in a reasonable time, that if you are ever unsatisfied with our recommended debt relief programs you can cancel at anytime without any penalties or fees.
Don’t get drowned in a sea of debt. Fill out the form you will find there and get started with a free debt analysis.