| Your Credit Score - Should You Worry About It? |
| Articles - Mortgage |
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Your credit score is composed of a combination of three digits which can wield enough power to impact the financial direction of your life. If you have the unfortunate luck of living with a rock bottom score, you're probably throwing away hundreds to thousands of dollars towards outrageous interest fees over time. If you're living with a depressed score, it will be nearly impossible to find a lender willing to make you a loan.
Your credit score is composed of a combination of three digits which can wield enough power to impact the financial direction of your life. If you have the unfortunate luck of living with a rock bottom score, you're probably throwing away hundreds to thousands of dollars towards outrageous interest fees over time. If you're living with a depressed score, it will be nearly impossible to find a lender willing to make you a loan. This number is so potent it can drastically influence your power to get a new credit card and mediate the best interest rate for a loan. Your score even has the power to impact the premiums you pay for insurance and your ability to secure a job. What impacts the final number of your credit score? The final score is calculated by a complex mathematical formula which evaluates how you supervise your use of credit. Your credit score appoints a number value from bits of information contained in your credit report. With this information, a determination of your likelihood to default on future credit is calculated. If you were to research all the credit scores calculated out there, it would amount to a list of hundreds of scores. If you were to ask financial professionals which score matters the most, it would be the FICO score (Fair Isaac Corporation). This score has the highest impact on your ability to obtain a loan with most banks and has been the grandfather of all scores. Typical scores can range from 300 to 850 with higher scores commanding better interest rates on a loan. The majority of home lenders use this benchmark score to determine how creditworthy you are. An average FICO score hovers around 725. If your score is less than 650, you'll have a hard time qualifying for low interest rate loans. Mortgage lenders place greater emphasis on the quality of your credit score when evaluating if you are trustworthy enough to repay a loan. If you've taken great lengths to maintain a high credit score, banks will look favorably on your application for a low interest rate loan. However, if you've suffered a financial setback and haven't worked to improve your score, lenders will consider you a higher risk for defaulting on a loan-if you're lucky enough to be approved for a loan; the interest rate offered will be much higher. Insurance companies also place great weight on your credit score when evaluating you for a policy. Insurers believe there is a direct correlation between the quality of your score and the likelihood of you filing a claim. Independent studies reveal the greater propensity for individuals with a low credit score to file a claim. Therefore, expect your insurance premiums to be higher than someone who has a better score. If you suffer from a lackluster score, there are steps you can take to improve it. Start by requesting a copy of your credit report from the three major bureaus (Experian, Equifax, and TransUnion). Review it carefully for any errors. Make a note of those items that are false and submit a request to delete the incorrect entry. You should also jump start the credit rebuilding process by applying for a secured credit card and making your payments on time. As you demonstrate responsibility over time, you'll see your FICO score improve. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. If you're a Christian with debt problems, become debt free with Christian credit counseling or by using these secret Christian debt solutions . |