The Importance of Building Excellent Credit What is credit and why is it so important. In short, credit is borrowing money from lending institutions to purchase items we do not have the cash for. Unless you have a substantial amount of money saved up, you will need credit at some point in your life. Not only will you need credit, but you might want to have excellent credit for the lowest possible interest rate. Additionally, credit scores are important; credit scores are the difference between individuals paying hundreds of dollars versus thousands. Credit is factored using five categories. By order of importance, the categories are payment history which counts for about 35%, amount owed 30%, length of credit history 15%, new credit or credit inquiries 10%, …show more content…
Next on the list is the amount owed to creditor; increasing this factor, your balance needs to be below 30% of each credit limit. For example, if you have a $1000 credit limit on a credit card, the total balance should be $290 or less. Length of credit history slides in after the amount owed; this grows over time. Having a credit history for 9 plus years yields an excellent credit rating. Following next in line is new credit or credit inquiries; this is applying for credit in general. To keep this portion excellent, do not apply for credit no more than twice every 2 years.
Inquires fade from the credit report every 2 years from the date you applied. Last on the list is types of credit such as mortgages, vehicles, furniture, and credit cards, etc. Using different types of credit demonstrates a healthy mixture along with displaying responsibility when paying on time; a good bracket for this one is an unbelievable 11 or more accounts.
As a result, credit ratings are formed. Credit scores range anywhere from 300-850 with 300 to 579 being very poor and 800to 850 being exceptional. With a 300 to 579 score, expect to pay an
It is up to you to know what is on your credit report and keep the data up to date. You might have paid your bills on time, but your credit report may show that your credit is less than perfect. You may have had a credit dispute with a merchant that was corrected, but not shown on your report. You may have a bankruptcy that was not properly recorded. You may also have experienced credit fraud.
What Dave recommends is paying the minimum balance on all your credit, except for the smallest balance. On that balance, put as much as your monthly budget will allow. In addition, if you get extra money coming in for the month, put it on the smallest balance also.
First I will explain what credit is. Next explain one efficient way to build credit. Finally, will touch upon the importance of an excellent credit Now let us begin with what is credit. Credit is what a lender uses to determine how well a person pays back the borrowed money. Credit is general viewed at 740 to 900 are excellent, 680 to 739 are very good, and 640 to 679 are fair and below 639 are poor.
Ritchie, Patrick. "Credit: The Foundation of Borrowing." In The Credit Road Map: A Practical Guide for Navigating Your Way to Good Credit, 21-23. Tempe, AZ: Success Road Map Press L.L.C., 2006.
Late Payments: People do not realize that their payment history can significantly affect their credit score. Every bank or lender provides a due date for making a payment but they also provide a grace period before which the late fees is levied. This is where people make mistakes. They
Originated by John Moody in 1909, the Moody’s rating system provides investors with grades to evaluate the creditworthiness of securities to sell to investors. Like we discussed in class, there are nine grades that range from least risky to most risky (“Ratings Definitions,” 2014). Prior to late 2007, Moody’s was a highly trusted rating company.
Your credit score is one of your most important financial attributes. Fortunately for those who are unsatisfied with their credit rating, there are plenty of options available. Improving your score is an attainable goal that everyone should aim for, even those who are content with their credit rating.
claimed for an eligible student for four years of higher education. To be eligible for the American Opportunity Credit, a student must not have completed four years of college, enrolled in at least one academic school year, and maintains at least half-time status. Drug convictions are not eligible for the credit. An eligible person can claim the AOTC if they pay qualified education expenses or pay the education expenses for an eligible student. The student must be yourself, spouse, or dependent for whom you claim an exemption on your tax return. As an example,
They then changed this. The minimum needed credit score used to be 620 points, but it was changed to a minimum 500 points without a down payment. The average person then assumed that since the bank was allowing them to take the loan out, they could afford it. They assumed that the bank knew what they were doing. The lender would then do things such as buy a new car or house, because the bank allowed him to believe that he could afford it.
Well lenders today with the new system should have much more information to hand and you are now judged based on your credit score. They should be able to see up to date information and all history of your borrowing. Example:
Suffice it to say that properly managed credit card use may improve your credit rating, and responsibly using XXXXX may help you improve your credit rating with your credit card.
Understanding My Credit Rating When you talk about personal credit and money management, you often hear about credit score. Now if you're new to the field, you might know little about credit score or personal finance for that matter. A credit score is a quantitative or numerical summary of all your credit report or credit history.
1. Improving Credit Score If you are looking to obtain a mortgage loan in the near future, then you should start to improve your credit score right now. You need to spend some money and find your current credit score. Then,
Bad credit is never a fun problem to have. Especially when it has the ability to ruin your plans of buying a car, a house, or apply for small loans. Most people, however, might not realize that it can also play a role in their relationship or marriage. Marrying someone with a low credit score can lead to multiple problems later on down the road. As a matter of fact, finances can be a major pressure point in any relationship, and debt can be a gloomy cloud that follows you around for years.
All you can do is work on improving the credit history and try again with a new application at a later date. In the US, under the Act, the Equal Credit Opportunity Act, a federal law passed in 1974, credit lenders must respond to loan requests within 30 days. If an application is a denial of credit arising, credit lender must provide a reason for the refusal.