Need Credit or Insurance? Your Credit Score Helps Determine What You’ll Pay

Ever wonder how a lender decides whether to grant you credit?

For years, creditors have been using credit scoring systems to determine if you’d be a good risk for credit cards, auto loans, and mortgages. These days, many more types of businesses — including insurance companies and phone companies — are using credit scores to decide whether to approve you for a loan or service and on what terms. Auto and homeowners insurance companies are among the businesses that are using credit scores to help decide if you’d be a good risk for insurance. A higher credit score means you are likely less of a risk, and in turn, means you will be more likely to get credit or insurance — or pay less for it.

The Federal Trade Commission (FTC), the nation’s consumer protection agency, wants you to know how credit scoring works.

What is credit scoring?

Credit scoring is a system creditors use to help determine whether to give you credit. It also may be used to help decide the terms you are offered or the rate you will pay for the loan.

Information about you and your credit experiences, like your bill-paying history, the number and type of accounts you have, whether you pay your bills by the date they’re due, collection actions, outstanding debt, and the age of your accounts, is collected from your credit report. Using a statistical program, creditors compare this information to the loan repayment history of consumers with similar profiles. For example, a credit scoring system awards points for each factor that helps predict who is most likely to repay a debt.

A total number of points — a credit score — helps predict how creditworthy you are — how likely it is that you will repay a loan and make the payments when they’re due.
Some insurance companies also use credit report information, along with other factors, to help predict your likelihood of filing an insurance claim and the amount of the claim.

They may consider these factors when they decide whether to grant you insurance and the amount of the premium they charge. The credit scores that insurance companies use sometimes are called “insurance scores” or “credit-based insurance scores.”

Credit scores and credit reports

Your credit report is a key part of many credit scoring systems. That’s why it is critical to make sure your credit report is accurate. Federal law gives you the right to get a free copy of your credit reports from each of the three national consumer reporting companies once every 12 months.

The Fair Credit Reporting Act (FCRA) also gives you the right to get your credit score from the national consumer reporting companies. Once per year you can get a copy for free. When you get your score, often you get information on how you can improve it.

Good FICO Credit Score? Tips To Getting The Most Out Of Your Home Mortgage Loan With Good Credit

Sometimes so much is talked about how to solve the problem of having bad credit, but what about when you have an excellent credit rating? Good credit is considered to be a credit score of 650 or higher. How can you get the best interest rate and loan terms to make your good credit history work for you? Even with excellent credit, you have to be careful not to get talked into a loan that may not be the best one you could qualify for.
Here are some tips to help you find the best loan for your great credit history:

1. Apply with as many mortgage companies online that will provide you with more than one quote per application, as long as they will not pull your credit with your application. If you are about to start applying for a mortgage, you don't want to have your credit pulled until you have narrowed down which mortgage company you want to work with. Every time your credit is pulled, your FICO credit score drops.

2. Talk to your lender about closing costs. If you have excellent credit, the lenders should be falling over themselves to get you a loan. Ask for special treatment. Find out what fees your broker or lender may be able to reduce or remove from your closing costs. Find out if they will match lower fees offered by another lender.

3. Make sure your lender is offering you excellent customer service. Are they returning your calls quickly? Are they answering all of your questions to your satisfaction? Have they thoroughly researched all of your loan options and offered you more than one possibility? If they haven't, you should probably look somewhere else. With good credit, you have no reason to be a quick, easy sale for a lender.

4. Research interest rates, mortgage information and articles online so that when your lender offers you a loan package, you will know about the fine print ahead of time. Whether you are purchasing for the first time or refinancing, it will help you to understand more about the mortgage process.

Easy Steps To Maintain A Good Credit Score

A good credit score can be an asset when you need it most. But if you don't regularly monitor your credit status, your credit score can become a liability. Have you checked your credit report lately?

By law you are able to obtain a copy of your credit report free every 12 months from each of the three nationwide credit reporting agencies, Equifax, Experian, and TransUnion. The three companies have formed a central agency so that you can request a copy from all of them at once. It’s called Annual Credit Report and can be accessed online.

This free credit report can be a valuable tool in maintaining your lifestyle and can save you money. By monitoring your credit report on a regular basis, you can catch any errors that may have been recorded and see that they are corrected immediately. Also with the increased crime of identity theft, with a vigilant eye on your credit reports, you can catch any funny business early.

There are just a few things you need to do to maintain a good credit score.

-First and foremost, make your payments on time.

-Stick within your budget and manage your debt.

-Do just what you're doing and monitor your credit report regularly to correct any possible errors.

-Try to avoid any unnecessary inquiries of your credit report, as each request can be marked against your good credit score.

-Reduce your credit card balances if they're limited out.

-If you don't have enough credit history, you may consider applying for new credit.

By carefully reviewing your credit report on a regular basis, you can be sure that you maintain a good FICO score. "What is a FICO score?" you say.

The FICO score is the 'grade' with which financial institutions use to judge the risk they take when extending you credit. The higher the FICO score, the better. The scores generally range from 499 - 800 plus.

By keeping a close watch on your credit reports, you can help to protect your good credit. Whether it's a car loan, credit card, or mortgage, your credit score can dictate the interest rate of your new loan. A good credit score can save you money.

Credit Score Improves by Paying on Time

These days, everyone seems to be concerned about his or her credit score. Lenders and credit bureaus have made it clear that the credit score, whether the new VantageScore model or the FICO score model, is a vital part of determining whether or not to extend credit to a consumer. The score is a distillation of a number of factors that make up a consumer's credit history and it allows a lender to see, at a glance if the would-be borrower is worthy of the loan.

Not only will a high credit score make it more likely that a consumer will get a loan, but the score will also help determine whether that loan will be granted at a favorable interest rate. The best interest rates are given to those with the best scores, and those with lower scores will have to pay higher interest rates and fees. Because of this, many consumers are interested in knowing how to improve their scores, and there is not shortage of companies that are willing to provide advice on that topic for a fee.

But the one thing that every consumer can do to increase his or her credit score is easy to do and costs nothing - pay bills on time. It may seem both simple and obvious, but a history of paying bills on time is important to creditors. After all, the decision regarding whether or not to grant a loan is based in part upon whether or not the lender expects to be repaid. The more likely the consumer is to repay, the less likely he or she will be to default.

How a consumer has historically paid bills makes up 35% of the credit score. More than one third of the score is devoted to whether the bills were paid on time or paid at all. No other component makes up as large a portion of the score, and for good reason - lenders want to be repaid! That said, the easiest and cheapest way to start improving a credit score is to make a concerted effort to pay bills on time. It is better to make even a minimum payment on time than it is to pay late and in full. With online bill paying becoming more and more common, it is not possible to schedule bills to be paid automatically, which can be of tremendous benefit to those consumers who aren't too organized and sometimes just forget to pay.

This is one of those cases where the most effective solution also happens to be the cheapest, and this solution is free. If you want to see your credit score increase, make sure that your bills are paid on time.

5 Easy and Quick Ways to Improve your Credit Score

Your Credit Score is one of your biggest financial assets. If your credit score is high, your borrowing rates will be low and therefore save you hundreds of dollars. The big mystery is how to maintain a high credit score. Well if you want to either maintain or repair your credit score, you are in luck, it can take as little as two months to raise your credit rating.

Your credit score is based on a few prime factors, there is no particular order in which I will discuss them (Some of them have higher weights in regards to the score). Repayment history, current debt owed, recent credit checks, and registered income (there are other factors as well). In order to repair or raise your score you may follow a few of the steps provided below.

1.)    Pay off all revolving credit cards. Revolving credit cards are like Discover card or any other monthly credit cards. Even though you might pay before the deadline, credit card companies report the debt owed on a monthly basis which may be before the deadline. On your credit score it will not show as bad debt, but it will decrease your overall score. The standard recommendations are as follows. If you have one credit card, pay it off before the months end. Second, if you have two credit cards, pay the minimum on both of them and work on paying in full one of them first.
2.)    Registered Income. This is your official salary from work. Basically the numbers they crunch are matched with what you earn. If you debt is larger than what you earn, your credit score is lowered. So, if you are an independent contractor or your income is just a little too low get a part time job. This will rise your potential earnings and increase your ability to repay your debt and therefore increase your credit score.
3.)    Check your credit score online with one of the official companies to see what or why your credit score is the level it is. This will help you determine what you can really do to increase your credit score.
4.)    Do not apply for every car, credit card, and home that you are looking at as an eager consumer. Because every time you try to purchase a home, car, or get a new credit card your credit score is checked and the crediting agencies lower your score if you have had two or three credit checks withing a few months of each other.
5.)    Lastly, open a savings account and budget your money accordingly that you will always have extra cash to help in times of need.

Protect your credit score because it can mean everything when buying a home or trying to get some capital for whatever purpose you need it for. It is not hard to raise your credit score, it is hard to maintain it. If you can purchase a credit score monitoring service, it will protect you from fraud and help inform you of ways to increase your credit score when needed.