SELECT YOUR LANGUAGE

A credit score is a number based on a level of analysis that represents a person’s credit worthiness.  The number is based on your credit report information provided by the credit bureaus.  The credit score is based on your credit history, which is the number of open accounts, total debt, types of credit, new credit, and payment history.   Your payment history counts for 35% of your credit score and the total amount owed counts for 30%.  The length of your credit history counts for 15%.  The type of credit and new credit counts for 10% each.  The credit score was created by the Fair Isaac Corporation (FICO).  Lenders use this information to determine your ability to repay loans.  The money that you owe to creditors can be reported on your credit report and this data is used to determine your credit score.    If you are late paying your monthly bills, the creditor can report this to the credit bureau and this information can be placed onto your credit report and will impact your credit score.  The three major credit bureaus are TransUnion, Experian, and Equifax. 

 

If you do not know your credit score, you can utilize a free website called, CreditKarma.com.  You can also send a letter to any of the credit bureaus and request a copy of your credit report (one per year free).   Credit scores usually range between 300 and 850.  A credit score in the range of 700 is considered good.  A credit score of 800 or above is considered excellent.  A credit score of 600 is considered fair.  Anything below 600 is usually considered poor.  When you have a poor credit score, it could be difficult to obtain loans.  The higher the score, the greater your potential is to borrow money from potential lenders such as for home, car, personal loans or credit cards. 

 

People with credit scores below 640 are considered subprime borrowers, which means that the interest rates are higher and could require a co-signer, if a loan is approved.  When the interest rates are higher, you will be paying back more money over time.  Closing credit cards can lower your credit score, however, if you think that you will overspend and you need to close them, do what is best for you financially.  Keep in mind your debt to income ratio before closing any of your credit card accounts, because this will determine your creditworthiness when you apply for future loans or credit.

 

One of the metrics used to calculate a credit score is credit utilization or the percentage of available credit being used.  The best way to improve your credit score is to repay any of your loans on time and keep your debt low.  Your credit score will also determine the amount of deposit that will be required, if you are approved for a loan.  If your credit score is poor, you could be required to put down a larger amount for the deposit.

 

Below are some tips to help improve your credit score:

​

-Pay your bills on time (6 months to a year or more).
 

-Keep your accounts in good standing.
 

-Work with a credit repair company (financial advisor) that you trust to help you improve your credit score by negotiating with creditors on your behalf.  They usually charge a fee for service, so be certain that this is an expense you can afford.

​

To learn more about credit scores watch the YouTube video below.

​

​

​

​

​

​

​

​

​

​

​

​

By Jason Torrents