Wisdom Wednesday: What is a “Good” Credit Score?

Learn about who keeps track of your credit score, and some rules of the road when it comes to determining “good” credit.

 

Your credit score is one of the most important components of your overall finances. Whether you want to establish yours, improve it or just keep it healthy, keep these things in mind.

  • Remember that a credit score lower than 650 could impact your overall financial health, making it hard to do things like get a loan or a good mortgage interest rate
  • Pay your bills on time, especially your credit card and loan payments —late payments of 30 days or more can leave damaging marks on your credit report
  • Opening multiple credit accounts in a short period of time may negatively impact your score
  • Check your credit report for free every year with Equifax, Experian, or TransUnion.
  • Contact a credit bureau if you find any mistakes
  • Remember that your credit score is determined by length of credit history, types of credit, credit inquiries, payment history, and total owed
  • Do everything you can to keep your “creditworthiness” high—that is, how big or small of a risk you look like to lenders
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Wisdom Wednesday: Understanding Your Credit Score

When it comes to your credit, it’s important to know how you stack up. Do you have good credit? Excellent credit? Poor credit? How can you find out?

In most cases, the easiest way to determine the health of your credit is to look at your credit score, a numerical value that reflects a mathematical analysis of your debt, your payment history, and other statistical data collected by the credit bureaus. In other words, your credit score is the compact, simplified version of your entire credit history, all rolled up into one tidy three-digit number.

Why Do You Need Good Credit?

The importance of having good credit can’t be understated. From helping you get a loan, to qualifying you for a great job, good credit simply makes life easier and less expensive.

In the eyes of lenders, employers, insurance agents, and a host of other people and entities, the state of your credit represents how responsible and even how ethical you are. For example, lenders look at your credit score to determine not only your ability, but your willingness to repay a loan. Insurance companies view an individual with a good credit score as someone who is trustworthy and less likely to commit insurance fraud. Even many employers run a credit check to determine if a candidate is likely to be a responsible employee.

Bad credit can prevent you from being able to purchase a home, work in certain industries, and will wind up costing you a bundle in higher interest rates and fees. However, if you understand what hurts your credit score you can make an effort to fix bad habits and improve your credit rating.

The Three Major Credit Agencies

Experian, Equifax, and TransUnion

There are three major credit agencies that provide consumer credit information (including credit scores) to the majority of interested parties: Equifax, Experian, and Transunion. Each reporting agency collects information about your credit history from a variety of sources, including lenders, landlords, and employers, as well as other sources. These include public records, current and past loans, your payment history, and other data. They then rate your performance using a proprietary scoring system to come up with a credit score.

Because each agency may access different information and has its own formula for calculating your creditworthiness, it is not uncommon for someone to have three different credit scores.

Understanding Credit Scores

Your credit score is a three-digit number that represents the state of your credit. If you know your score, you can get a sense of how lenders, insurance agencies, and interested employers view your credit:

Excellent Credit: Credit Score Above 800

If your credit score is above 800, you have an exceptionally long credit history that is unmarred by things such as late payments, collections accounts, liens, judgments, or bankruptcies. Not only do you have multiple established lines of credit, but you have or have had experience with several different types of credit, including installment loans and revolving lines of credit. You generally have a stable work history, usually with one company.

Simply stated, you are an A+ borrower in the eyes of all lenders big and small, and will have no trouble securing a loan of your choosing. Be prepared to receive the very best interest rates, repayment terms, and lowest fees available. Insurance companies love people like you because they’re confident that you’ll pay your premiums on time and pose virtually no risk of insurance fraud. Plus, prospective employers love you because you have proven that personal and financial responsibility are of the utmost importance to you.

Very Good Credit: Credit Scores Between 750 and 800

If your credit score is between 750 and 800, you have a long and distinguished credit history that shows a responsible payment history and the ability to handle multiple types of credit responsibly. As a matter of fact, for the most part, you are regarded in the same standard as borrowers with excellent credit history, with the exception that you may have a higher debt-to-income ratio.

In the eyes of lenders, insurance companies, and employers, you’re just as good as anyone with excellent credit and, for the most part, will receive the same red carpet treatment. Ultimately, having very good credit will qualify you for some of the best deals in town.

Good Credit: Credit Scores Between 700 and 750

Having good credit means that you have built a solid credit history by working hard to keep your accounts in good standing – however, there may be a late payment or two somewhere in your past. Things happen sometimes, but they are nothing you can’t handle. You might have had a collections account reported, but you’ve paid it. And you know you have some extra credit card debt, but you’ve made strides to get it under control.

Generally, lenders will have no issues loaning money to someone like you. Your good credit score will land you competitive interest rates and low origination fees, though certainly not as good as you could have gotten with a few more points on your score. You’ll also have no trouble getting an insurance policy for just about any need, but you should expect your premiums to be somewhat higher than for those with excellent or even very good credit. Furthermore, your good credit should not have any negative effect on your ability to get hired.

Fair Credit: Credit Scores Between 650 and 700

Having fair credit means that you’ve hit a few speed bumps in the past. Late payments, collections accounts, and maybe even an aged public record dot your credit history. Or, perhaps you simply have too much debt.

Regardless of the reason for the less-than-stellar score, you’ll have a harder time finding a lender willing to service a loan, especially if the low credit score is a result of slow payments. You’ll represent a higher risk of default to a lender and may therefore be required to secure the loan with a down payment or with tangible personal property (otherwise known as “collateral”) before a loan offer will be extended.

Having fair credit means that you have some work to do in order to get yourself back into good financial shape. It is imperative to take steps now to prevent any additional damage to your credit report, and get back on the road to good financial health. By reducing credit card debt, ensuring that you get your bills paid on time every month, and paying off any open collections, your credit score will move enough during the next three to six months to get you back into the realm of a good credit rating.

Bad Credit: Credit Scores Between 600 and 650

Having bad credit is not a pleasant experience. You’ve had multiple credit issues in the past, most likely involving payment history on one or more accounts. You’ve also most likely had an account or two in collections, and could have possibly had a bankruptcy filing.

It’s going to be extremely difficult to find any lenders willing to lend to you without a significant down payment or collateral to secure the loan against default. Insurance agencies will still underwrite insurance policies for you, but the products will be limited and they are going to cost significantly more than the same products for customers with better scores. You may also have higher car insurance costs.

Having bad credit means it’s time to roll up your sleeves and get real about your current financial situation. Though your current position may be of no fault of your own – thanks to a job loss, illness, or other unforeseen circumstance – it’s your responsibility to take the necessary steps to reverse the course you are on. Take a good hard look at where you are in your life and take the necessary steps to reverse the trends that led to your bad score.

Very Bad Credit: Credit Scores Below 600

If you have very bad credit, you are more than likely delinquent on more than one account. You have active collections accounts, and probably have at least one judgment, repossession, or bankruptcy in your file. If you have credit cards, they are maxed out or shut off for nonpayment.

This is as bad as it gets, as this will have many negative effects on your life. Lenders, with the exception of those who specialize in lending to borrowers with bad credit, will not approve you for any loan product, even if you can provide a sizable down payment or collateral, and insurance agencies will likely refuse you based on the risks you pose. Often, employers that check your credit will not hire you, whether there is another viable candidate or not.

Bad credit, no matter how bad it is, is still a temporary condition. Late payments will vanish from your records after 7 years, and public records are purged after 10.

While it can be tough to be patient, know that time is on your side when it comes to dealing with bad credit. Now is the time to start making good financial choices: pay accounts on time, pay off collections accounts, and refrain from taking on additional debt. In just a few years, you can say goodbye to your bad credit rating and hello to a world of financial possibilities.

Visit the websites below to get your completely free credit report today!

https://www.creditkarma.com/auth/logon/

https://www.annualcreditreport.com/index.action

Source:http://www.moneycrashers.com/good-credit-score-ratings-range/

Author: Sandra Parker

Wisdom Wednesday: Living Within Your Means

budget

Spending less than you make is the foundation of personal financial success. In a world that encourages us to get rich quick and take shortcuts to financial stability, it’s often hard to sort out the good advice from the bad. However, simple math never lies. You cannot get ahead in life if you are spending more than what you bring in.

If you constantly feel like there is more month than money, work on developing these five habits and make your money start working for you.

1. Use a budget

A 2013 Gallup survey found that only 32 percent of all American households use a budget. The same poll also found that households making over $75,000 a year were most likely to budget. In other words, wealthy families and individuals become wealthy and maintain their financial status by budgeting their resources. You can find simple budgeting forms online or stop by the GOAL Center on DCC’s campus to speak with a coach about budgeting and receive a free budgeting binder to help stay organized with your personal finances.

2. Keep track of expenses

Make yourself accountable to your budget and you’ll quickly find out where you and your family are overspending. When you start tracking where and how you spend your money, you may be surprised at how much eating out for lunch, quick trips to the store, and movie night are really costing you. Keeping track of spending will also let you know where you can cut back.

3. Distinguish wants from needs

Every day advertisers try to tell us what we need to be happy. In 2011 alone, Ad Age estimates that companies spent over $50 billion US dollars on television advertising. Companies use marketing teams, social psychologists and millions and millions of dollars to trick us into buying things we don’t need. Be aware of how advertising influences your purchasing and ask yourself before every purchase, “Do I really need this?” Impulsive spending habits can lead to multitudes of debt and lack of essential savings.

4. Avoid comparisons

Mark Twain once said, “Comparison is the death of joy.” Trying to keep up with others will rob us of happiness and leave us in debt. When we’re chasing someone else’s lifestyle, we’re forgoing the opportunity to create a life filled with the things that truly make us happy.

5. Develop an attitude of gratitude

Much overspending could be avoided if we appreciated what we already have. Oftentimes, we buy things because we are feeling bored, lonely, isolated or upset. The next time you want to indulge in some retail therapy, make a list of ten things you’re grateful for first. Switching your focus from what you don’t have to what you do puts finances in their proper perspective. Accumulating stuff cannot bring long-term happiness, but feeling like a slave to your money will certainly bring long-term misery.

Financial advisor Dave Ramsey is famous for saying that finance is 20 percent head knowledge and 80 percent behavior. While it’s helpful to have a sound understanding of budgeting and financial planning, the most important ingredient for successfully living within your means is having a good attitude about money.

By being accountable for where your money goes and avoiding the pitfalls of social comparison, you’ll be well on your way to financial stability

Source: http://familyshare.com/5-must-have-habits-to-live-within-your-means
Written By: Heather Hale