Credit

 

Credit Scores


Credit Reports Lead to Credit Scores

Not to be confused with a credit report, your credit score is a rating based on the data in your credit report. A credit score is an indication of your past and present credit history and likely credit risk, expressed as a number usually ranging from 300 to 850. Think of it as a shorthand way of predicting your future risk to lenders.

The standard industry model for calculating a credit score is the FICO model named for the Fair Isaac Corporation, which devised the formula. Most consumers will have three credit scores, one at each of the three national credit bureaus: Equifax, TransUnion and Experian. Some lenders look at all three credit scores; others at just one. It depends on the type of loan you’re applying for. 

Why is My Credit Score Important?

Credit scores affect whether or not you get loans and credit cards, and how much you pay in interest. A score as low as 340 indicates a high-risk applicant who may not qualify for a credit card or a mortgage, while someone with a score of, say, 840 is considered to have excellent credit and can choose various financing packages and get low-interest loans and credit cards.

Say your credit score is not so hot, and you get a credit card with 18% interest. It will take 37 months to pay of $1000 on the card with minimum monthly payments of 10%, and the interest will have cost you $146.50.
Think how much a good credit score could save you in interest on a mortgage or auto loan. Credit scores have tremendous influence on your mortgage rate.

Source: MyFico.com
Credit Score 30-Year Fixed Rate
760-850 5.35%
700-759 5.57%
680-699 5.75%
660-679 5.96%
640-659 6.39%
620-639 6.94%


What Affects My Credit Score?

Beware:
Divorce and Credit

Divorce and Debt: "When Harry Met Sally, Sally Maxed Out Their Credit Cards, and They Split" Although a judge may decree one splitting spouse responsible for certain credit card debts, failure to pay by that spouse can negatively affect both partner's credit report.

The following Websites offer clear, easy to follow advice on how to safeguard your credit rating in the event of divorce: www.divorcenet.com www.equalityinmarriage.com, and www.divorceinfo.com

Credit scores can change in a heartbeat. Making payments on time is only part of what potential lenders take into account. Divorce, loss of employment, applying for new credit, late payments and having a credit account closed all impact your score.

FICO categories that affect your credit score and are listed in order of importance:

  • Payment history (35%)
  • Present indebtedness (30%)
  • Length of credit history (15%)
  • Attempts to gain new credit (10%)
  • Kinds of accounts in your credit report (10%)

 

How Do I Get a Copy of My Credit Score?

While the credit bueause will provide you with a credit report (available at www.annualcreditreport.com), they are not required to give you your credit score for free, even once a year. They charge a fee for it. For your credit score, your best bet is to go to www.myfico.com to order credit scores.

 

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