All About Credit Scores
Your credit score is a 3-digit number that will follow you throughout your life. Whether you're taking out a mortgage or applying for a credit card, your credit score will determine the interest rates available to you. In fact, your credit rating can even impact your auto insurance premiums. Consumers can implement strategies to improve their credit scores and, ultimately, receive preferential interest rates and loan programs down the road. By monitoring your credit, you can more easily establish a budget for debt consolidation.
Credit score background
Credit scores are also called FICO scores. Developed by the Fair Isaac Co., your score assesses your credit risk. The number, which ranges from 300 to 850, is similar to grades you received in school. The higher your score, the better your credit. Consumers should aim to get their scores above 700 - even above 720 - to be categorized as having "excellent" credit. While it can seem difficult to raise a credit score, it is possible. A few simple tips can make it gradually rise.
How to improve your credit score
Your credit score can fluctuate throughout your life. While we all want it to go up, we must change our spending habits and payment behaviors to make sure our score benefits. By following these tips, you can gradually improve your score:
- Pay your bills on time: It's one of the fastest ways to boost your score, and it's also one of the easiest. Just pay your bills on time. Fair Isaac Co. monitors not only the balances you carry, but also the way you pay your bills. If you habitually pay your bills late, or forget to make a payment, it will quickly be reflected in your credit report. Conversely, paying your bills on time develops a good trend on your report, and your score will benefit.
- Time can work in your favor: The longer you establish healthy payment and borrowing habits, the better. FICO doesn't respond well to a haphazard consumer. If you open an account, keep it open for several years. Don't open and close credit accounts quickly - it will seem as though you aren't dependable, and your score can suffer. Keep your accounts open for long periods of time.
- Keep your balances low: Your balances on "revolving" accounts - such as credit cards, are monitored. If you carry high balances, it shows that you have an inability to repay your debts. Generally, you don't want to carry a balance of more than 30 percent of your available credit. This means that if you have a credit card with $10,000 of available credit, you don't want to carry an ongoing balance of more than $3,000. FICO monitors the ratio between balances and available debt. The lower the balances, the better for your score.
- Check your report: There is a fallacy that if you check your credit report, your score will drop. Untrue. In fact, checking your credit report is a very smart thing to do. At least once a year, look at your credit report. Check to make sure the accounts listed as open are correct. Also look to see if any accounts you have closed are incorrectly listed as current. If something seems wrong, immediately contact the credit bureau. You could be a victim of identity theft, or something as simple as a clerical error. Regardless, an error could affect your score.
If you want more information about debt consolidation, read the questions that are commonly asked and the answers to those questions.
