How Your Credit Score Determines The Size Of Your Bank Account

Every time you apply for any type of loan or you are issued credit or you pay any bill, it becomes a part of the equation that determines your credit rating.

The primary or big three credit agencies are: Experian, Equifax and Trans Union. The credit score they determine is what all major lenders and most companies use when deciding if they will lend you money or issue you credit and the terms that credit will have.

Your Credit Rating - What Does It Include?
All of your current debts are included when determining your credit rating. Basically, your credit rating is a history of all your debts, with special emphasis placed on anything that has gone wrong.

A few of the primary factors that determine your overall rating include: Late Payments - The number of times you've been 30, 60, 90 or more than 120 days late on any payment. This could include rent, mortgage, phone bills or any type of credit card. Defaulting (never paying) on a debt will clearly hurt your credit rating for a period of time. In some instances, up to 7 years but each company issuing credit has their own guidelines and in many cases it will cause a negative impact for 2 - 3 years. Owing a high percentage compared to your credit limit also brings down your credit score. For example: If you owe $10,000 on your credit cards you are much better off to owe $3,000 on two different cards with a credit limit of $5,000 each and 4,000 on another card with a credit limit of $6,000 than to owe the entire $10,000 on one card with a credit limit of $10,000.

It is also worth considering that the credit report of anyone you live with or more precisely anyone with whom you share a debt obligation with is also linked to your report and if they default or have a late payment, it will reflect on your credit score. This happens with when couples get divorced and one party decides to stop making payments.

What is FICO?
The standard method for expressing your credit rating is called FICO. In a nutshell, it's an acronym for expressing your credit worthiness with a number. FICO was named after the Fair Isaac Corporation, who invented it.

One common misconception about credit score is that every time your credit is pulled is that it hurts your credit score. This is how it works.

If it's pulled by a lender then it doesn't hurt your score because it's assumed they would only be pulling it to determine if you qualify for a mortgage. On the other hand, if you continually apply for department store credit cards or car loans or similar types of credit and those types companies pull it then it can hurt your credit score, if it's pulled too many times in a short period of time. The exact number of times it can be pulled in a particular time frame before it hurts your score is an industry secret but if you use common sense and don't over apply then you should be ok.

Why Your Credit Rating is So Important
Any time you get turned down for a any type of loan, chances are that it was because of your credit rating. Companies that are considering giving you a loan rely almost exclusively on this rating when making the decision whether or not to issue you credit. Regardless, the bottom line is this. In virtually all cases, the lower your credit score the higher the interest rate.

Your credit score directly determines the credit terms you'll receive for any type of loan - mortgage, car, credit cards, etc. And remember, all bills affect your credit rating so if you don't pay your phone bill or your utilities or your rent on time it will have an effect on the terms you receive or even if you qualify for a mortgage or car loan. So get into the habit or paying your bills on time and get a solid credit rating because the amount of money you'll save over your lifetime in interest charges will be huge.

Free Credit Reports
One of latest trends in credit reporting is for companies to offer individuals a free credit report. In and of itself, there's nothing wrong with this but I would like to point out a vital point that you need to be aware of.

I mentioned earlier that there are 3 primary credit agencies that lenders rely on looking at your credit. The key factor here is three and that's where you can run into trouble when you get your Free Credit Report. When you get a Free Credit Report you will only be getting the results from one of the primary credit agencies and this can misleading.

The reason it's misleading is because virtually ALL lenders will pull what's called a tri-merge credit report when you apply for a loan. They do this in order to get the full picture of your credit history. Then they throw out the high and the low score and use the middle score to determine your credit rating.

When you get your Free Credit Report you will only be given a credit report pulled from one of the agencies and so you have a pretty good chance of being misled as to what your actually credit score is. Unless, the credit agency that was used just happened to be the one with the middle credit score you won't have your 'true' credit score. And the reason this matters is because the difference between the three scores can be significant. So be wary of single agency credit reports and when applying for a loan always ask for your middle credit score because that's the only one that really counts.

How To Raise Your Credit Score

Is it really that important to raise your credit score? Maybe. Lenders have "break points" between scores that get you one interest rate or another. Suppose you have a score of 688, and the lender drops the mortgage rate by .5% at 690. Those two points can cost you an extra $20,000 in interest on a $170,000 loan (over 30 years at 6.5% instead of 6%). Is that important enough for you? What can you do?

Eight Ways To Raise Your Credit Score

There are ways to raise your credit score. Some of them take more time than others to have an impact, but if you start working on it now, you can boost that score before long.

1. Check credit reports for errors. If there are errors that are hurting your score, contact the credit reporting agency that issued the report and challenge them. The agency is obligated to investigate and correct any mistakes within thirty days. If a creditor doesn't respond to their inquiries, they have to automatically remove the item in question (you may have to remind them about this part of the law).

2. Pay off balances every month. It is just good for your future, as a way to keep you out of excessive debt. It can save you a lot in interest also. Finally, it demonstrates your ability to manage your debt, and so increases your credit score.
3. Have the right number of credit cards. At least two is best, but having more than five or six can actually lower your score.

4. Pay bills on time. Borrow money to get those bills paid on time, if you have to. Paying on time has the biggest positive impact on your credit score. Unfortunately, paying off old delinquencies won't immediately raise your credit score, because these will still show as being paid late, but start paying on time now, and with time, these old late payments are deemed less important.

5. Manage your credit card balances. It's best for your credit score if the balance on a given card is less than 50% of the limit on that card. Manage your use of your cards to keep the balances below this amount. If, for example, you have three cards with limits of $2,000, $3,000 and $2,500, it is better to have a $600 balance on each than $1800 on one.

6. Don't apply for too many cards and loans. These applications generate inquiries on your credit reports. Having oo many inquiries in a short time lowers your score. Avoid applying for a lot of cards in a given year.

7. Keep and cancel the right cards. When you close accounts or cancel cards, do it right. Old accounts are better than new ones for your credit score. Keep those old ones open, even if the balance is zero. Also, because it's best to keep balances below 50% of the card limits, you might consider canceling your lower-limit cards if you regularly keep balances on your cards.

8. Be careful about whom you borrow from. Furniture stores and others help you finance your purchases, but through finance companies. This can lower your score. If you can't pay cash, it is better to borrow the money from a bank or credit union.
Maybe you noticed that this is almost a list of things that lower your credit score. It basically is, and you should keep that in mind. Paying things bills on time and avoiding the things that lower your score - that is the best way to raise your credit score.

How to overcome a bad credit score?

Do you want to borrow a loan but are afraid that you would be denied due to your bad credit score? Bad credit score can greatly affect your chances of getting a suitable loan. Many money and bank lenders solely depend upon your credit score rating just to judge you’re credit worthiness to pay off the loan.

Bad credit score is certainly not the end of the world; if you undertake effective measures you can overcome your bad credit history.

Why to undertake credit score repair?

Credit score repair is nothing but raising your credit score from its current position to a higher position. It’s quite possible that your credit report has number of errors in it. For instance you must have made some payment to your creditors but it must have not been recorded in your credit report. Credit score repair is informing credit report agencies of these errors and getting it rectified as quickly as possible. Rectification of errors in your credit report can affect your credit score greatly, thereby leading to improvement in credit report.

Best ways to overcome bad credit score
If you are under the trauma of a bad credit score you can overcome it by paying your bills and meeting your financial responsibilities. Owing a reasonable amount of money and being able to repay will show your money lenders that you take your finance very seriously.

How can you fix your credit score?
• Check your credit report at least once in six months and rectify errors in it immediately
• Do not open unnecessary account. It would be advisable to shut down all the unnecessary accounts
• Do not open multiple accounts at the same time. Remember a zero balance account is also taken into consideration.
• Repair your credit report in case of any errors
• Pay your minimum balances before the due date. This alone will fix your credit report
• Avoid excessive credit
• Look for identity theft

How to keep your Credit Free Score healthy?

The most important thing to do to keep your Credit score healthy is to pay your bills on time. Even though credit score are three digit numbers but it has great importance in today's business world. There are number of free credit score online sites that help you to keep a check on your free credit report and credit score.

Always remember a good free credit score provides an added advantage for the future. If you are looking to make any big purchase like buying a car or your dream house you need to have a good credit score to impress the bank lenders. Many moneylenders or retailers take the help of credit score for further transactional act. By doing this they judge whether you can repay the debt back or they have to suffer financial stake. It is obvious that a person with bad credit score has to suffer credit limitation. If you have a good credit score it's an added advantage but bad credit score obstructs such flexibility.
How to improve your Credit score?

If you have a burden of high debts and have to make huge interest payments, you need to pay them as quickly as possible. Always keep a check on your credit score. You need to pay your dues from time to time, every month at least for one year to get your credit score on track. Remember that a good credit report and score decides your purchasing power so it is essential that you maintain a good credit score.

Even though credit score is just a three digit number its importance is substantial. The topic is vast and you would want to know number of things about this credit score check.

How To Improve Your Credit Score – Even If You Are Not A Financial Expert!

If you have less than perfect credit, and you've ever tried getting a loan or credit card, then you know just how much poor credit can cost you.

So, the next step to getting yourself completely out of debt is learning how to clean up your credit file!

Many people think that by paying on time they automatically have "perfect" credit.

But that's not always true - if you have too much credit available to you if can hurt your credit, even if you don't use all of it. So can having high credit card balances, even if you pay on time every month.

You Can Repair Your Credit

Also, most people think - incorrectly - that once something bad goes on your credit report, it will automatically stay there for a long time. That's not always true, either.

Fortunately, there are ways to remove even the MOST damaging items on your credit report...and to do it legally and honestly!

Keep in mind that debt negotiation does go on your credit report, and it can lower your credit score. And that's where credit repair comes in.

The first step is to get a copy of your credit report. Even if you THINK you have perfect credit, it’s still a good idea to get a copy of your credit report every year and check it carefully.

Because statistics show there’s a good chance you’ll find AT LEAST one negative item on your credit report!

But, just because you do find some negative items on your credit report does NOT mean your credit is automatically ruined forever!

There is nothing written in stone saying you must pay for your mistakes for the rest of your life - yet there ARE rules that require creditors to remove incorrect and damaging items from your credit report.

All you need to know is HOW to get them removed!

How To Repair Your Credit

One option is to hire a credit repair company. Unfortunately, there are a lot of credit repair companies out there that will charge you an arm and a leg. Some even use illegal tactics.

So, if you decide to hire someone else to repair your credit, please BE CAREFUL! Ask lots of questions. And do lots of research.

Fortunately, there are ways to repair your credit on your own. Once you know how to do it, credit repair is NOT that difficult at all. It does take some work, especially if you have a lot of negative items. But even the worst credit can be repaired if you do it correctly - and you keep trying.

Credit repair is not an overnight process, so it’s a good idea to get started cleaning up your credit as soon as possible.

Everyone makes mistakes, especially when it comes to money. But you DON'T have to keep paying for those mistakes forever!

How to Improve Your Credit Score under the New Vantage Score System

Poor credit is such a common thing among Americans that the three major credit bureaus have introduced a method for helping consumers to get out of debt. The VantageScore system was introduced in March of 2006 and made available to all merchants who report to the three major credit agencies. Essentially, the point of this new system is to provide a more accurate and consistent credit ranking system for consumers.

In the past, the only credit scoring system was the FICO system, which is calculated on software developed by Fair Isaacs Corporation. The problem with the FICO scoring system was that you could have a very different score from all three bureaus as they each use their own method of calculations.

The new VantageScore system is supposed to create a more uniform method of determining credit risk. It combines new technology and the expertise of industry leaders on credit data to get an easier to understand and more consistent score for use by merchants and consumers alike. The score will be more like academic grading and range from 901-990 for the best credit and 501-600 for the worst.

The best thing about the new scores is that if you have little or no credit history, you can still get a decent score. To improve you VantageScore, always pay your bills on time. The payment history section of your credit report is an important factor in your VantageScore. So be sure that you do not take on more debt than you can handle

Also try to pay more than the minimum balance on credit cards and loan balances. Doing so will keep the principle down and prevent you from maxing out a card or defaulting on a loan. Even five or ten dollars extra per month can make a big difference down the line.

And check your credit report at least once a year for errors. You are eligible for a free report from all three agencies once per every twelve months. You would be surprised at how many errors there can be on your report. So get the facts straight so your VantageScore will be based on accurate information about you and your spending habits.