Are you trying to buy a home, a car, or applying for a loan? Your credit score will be a major determining factor in your approval process.
Lenders want to be able to assess the risk of approving your application. Approximately 90% of the top lenders in the United States rely on your FICO Score. Your credit score can range from 300-850. It is calculated based on the amount you owe, new credit, length of credit history, credit mix, and your payment history.
A good score means your lender thinks–based on the evidence–that you shouldn’t have any trouble paying back your debt. That means you should qualify for not just the loan or purchase itself, but also for low interest rates that won’t leave too much of a dent in your wallet.
A less-than-good score means the lender has some doubts–also based on the evidence–that you’ll be able to pay, or pay on time. This means you may be getting a worse deal, with much higher interest rates–or you might not be approved at all.
Understanding where your credit score falls within the range is very important. You can request 1 free credit report per year from www.AnnualReport.com, they will give you a report only there is a fee for your credit score. If you want to check your credit score/ report more frequently, I suggest subscribing to one of the credit monitoring companies (Equifax, Experian or Transunion). you are not penalized for checking your own credit score.
The Line In Between
When it comes to credit, where is the line that separates the good and the bad? Somewhere between 620 to 680 is considered acceptable. Anything below that is considered a bad credit score. What you’re aiming for is a score above 700. A 550 is considered a bad credit score, but that doesn’t mean you’ve reached rock bottom. Don’t panic–rising above a 550 rating is very doable; take note of the list below for some help. These are steps that actual people have taken to raise their scores.
- Never ignore your debt. Pay off all the minimum monthly payments, and if you can, pay a little more.
- Get a secured credit card. With a 550 score, it is possible to get a secured credit card. A secured card is a credit card that you fund with your own money. You will be asked to provide a deposit (maybe $250), your deposit becomes your credit limit. If you pay on time your deposit will be refunded. After some time you will be able to apply for unsecured card. Use your secured card to purchase small items, and make sure you pay them in full the next month.
- Become an authorized user. Ask a friend or family member to add you as an authorized user on their card. This will help increase your credibility as well as your score.
Complete these steps, and you’ll be soaring to a high 700 score or more in no time.
The sad reality is, about 80% of Americans are in debt, and 30% of this number are young adults. Because of student loans, many young adults enter the workforce already tens of thousands of dollars in debt. This makes it hard to maintain a good credit score, especially if you are just starting to build a life on your own. It’s a good thing that financial coaches are dedicated to helping people stand up and be more responsible with their money. If your score is on the low end, don’t fret–you still have time to raise it. I am offering free discovery sessions, during this session we will discuss how I can help you reach your goals, click here for your discovery session.
©2018 by Felicia V. Petit-Frere. All Rights Reserved. Felicia V Petit-Frere, MBA is a financial coach, founder and CEO of Windsong Financial coaching LLC (WindsongFC.com) where we help you become financially fit one step at a time. Join me in a facebook group set up just for you, The Smart Money Maker, we offer free challenges, webinars and do it yourself or group programs.