April 11th, 2017 7:07 AM by Jackie A. Graves, President
scores can wield a lot of influence in your life. They can lead to good or bad
interest rates offered by lenders when you want to buy a home or finance a car.
You may not realize that they matter even beyond the financial realm.
For example, according to a 2016 Bankrate.com survey, 38% of respondents would
reconsider dating someone with a low credit score. The credit concern is more
pronounced among women, 43% of whom reported that a credit score would have an
impact on their interest in dating someone. Only 32% of men felt that way.
it's rather worthwhile to have a solid credit score. Here are three important
tips that can help you be smart about it.
off, it's good to understand what good or bad credit is, and just how powerful
your credit score can be when you want to borrow money. Basic
(non-industry-specific) FICO scores, which are used by about 90% of top
lenders, range from 300 to 850. Here's how the folks at FICO rate the scores:
FICO Score Range
Likelihood of Borrower Becoming Delinquent
800 and higher
579 and lower
table below reflects the power of your credit score when it comes time to
borrow, showing recent interest rates for someone borrowing $200,000 via a
30-year fixed-rate mortgage:
Total Interest Paid
MyFICO.com, as of early April 2017.
difference between the highest and lowest interest rate range in the table
above is $190 per month (which is $2,280 per year) in mortgage payments -- and
more than $68,000 in total interest paid!
a high credit score can save you tens of thousands of dollars -- and perhaps
even get you a date.
your credit score is high, congratulations! Your primary credit-score-related
task now is simply to keep it high. If your score isn't what you want it to be,
though, take heart: There are ways to boost it.
though, it's helpful to understand just what goes into the score. Here's how FICO
constructs its scores:
35%: Payment history
30%: How much you owe
15%: Length of credit history
10%: New credit
10%: Other factors such as your credit mix
the most important factor is paying those bills on time. That makes sense,
since a credit score is all about your creditworthiness -- how risky it is to
lend money to you. If you have a poor bill-paying record, you won't find
lenders offering you the best interest rates. They'll see you as having a
decent chance of defaulting on your loan, and they'll need to compensate for
agencies will be looking at not only how many times you paid a bill late, but
also how long you took to pay each one, and whether any unpaid bills ended up
in the hands of collection agencies. If you get back to paying every bill on
time, the agencies will notice and your score will eventually start rising.
Another way to improve your credit score Opens a New Window.is to check your credit
report for errors and have any fixed. (You can get free copies Opens a New Window.of
your credit reports once a year from each of the main credit-reporting agencies.)
You might also benefit by keeping your balances low and paying off a lot of
debt in order to lower your debt-to-available-credit ratio. Mortgage lenders
like to see you owing only about 10% to 30% of the sum of all your credit
limits, because it suggests that you have your debt under control and can
afford to take on some more debt via the mortgage you're seeking.
course, it's hard to evaluate your credit score and know if you're improving it
if you don't know what it is. It used to be harder to find out what your score
was, but now there are ways to access it online. Many credit cards and websites
offer free access to your credit score.
the Consumer Financial Protection Bureau, some of the sites will fund the
access through advertising sold on their websites, while others will want you
to sign up for a credit monitoring service. Such services aren't free, though
there may be a free initial trial period. You could also find and consult a
non-profit credit counselor, who will be able to show you your credit score and
discuss what it means.
It's hard to beat the
convenience of having a credit card that offers free ongoing access to your
score, though. The card you use might offer it, and if not, here are a few contenders Opens a New Window.to
Barclaycard Ring Mastercard: This card has a nice range of features, including
no annual fee, no foreign transaction fees (making it very convenient for
travelers), and no balance transfer fees. It also won't let a late payment
trigger a "penalty APR." That's something many cards do, hiking your
interest rate -- often to 25% or more -- if you're late making a payment. (Read
our full review of Barclaycard Ring Mastercard Opens a New Window.to
Chase Slate: This card
also doesn't charge an annual fee or impose a penalty APR. It also offers
Blueprint financial planning tools to its cardholders to help them with
debt-reduction strategies. (Read our full review of Chase Slate Opens a New Window.to
Discover it -- Cashback Match: This card offers free FICO scores on your
statements, online, and/or in the Discover Mobile app -- and it includes not
just your latest score, but past ones, too, so that you can see whether your
score is going up or down. The cardalso offers 5% cash back on up to $1,500
spent over three months in categories that you activate (such as restaurants,
gas stations, home-improvement stores, or Amazon.com). It
charges no annual fee or foreign transaction fee, and imposes no penalty APR.
(Read our full review of Discover it Card Opens a New Window.to
your credit score as high as you can and keep it there, and you may be able to
save tens of thousands of dollars -- perhaps while keeping the interest of a
Photos courtesy of cafecredit.com
Selena Maranjian - To view the original article click here