The Importance of Building Excellent Credit What is credit and why is it so important. In short, credit is borrowing money from lending institutions to purchase items we do not have the cash for. Unless you have a substantial amount of money saved up, you will need credit at some point in your life. Not only will you need credit, but you might want to have excellent credit for the lowest possible interest rate. Additionally, credit scores are important; credit scores are the difference between individuals paying hundreds of dollars versus thousands. Credit is factored using five categories. By order of importance, the categories are payment history which counts for about 35%, amount owed 30%, length of credit history 15%, new credit or credit inquiries 10%, …show more content…
Next on the list is the amount owed to creditor; increasing this factor, your balance needs to be below 30% of each credit limit. For example, if you have a $1000 credit limit on a credit card, the total balance should be $290 or less. Length of credit history slides in after the amount owed; this grows over time. Having a credit history for 9 plus years yields an excellent credit rating. Following next in line is new credit or credit inquiries; this is applying for credit in general. To keep this portion excellent, do not apply for credit no more than twice every 2 years.
Inquires fade from the credit report every 2 years from the date you applied. Last on the list is types of credit such as mortgages, vehicles, furniture, and credit cards, etc. Using different types of credit demonstrates a healthy mixture along with displaying responsibility when paying on time; a good bracket for this one is an unbelievable 11 or more accounts.
As a result, credit ratings are formed. Credit scores range anywhere from 300-850 with 300 to 579 being very poor and 800to 850 being exceptional. With a 300 to 579 score, expect to pay an
First I will explain what credit is. Next explain one efficient way to build credit. Finally, will touch upon the importance of an excellent credit Now let us begin with what is credit. Credit is what a lender uses to determine how well a person pays back the borrowed money. Credit is general viewed at 740 to 900 are excellent, 680 to 739 are very good, and 640 to 679 are fair and below 639 are poor.
It is up to you to know what is on your credit report and keep the data up to date. You might have paid your bills on time, but your credit report may show that your credit is less than perfect. You may have had a credit dispute with a merchant that was corrected, but not shown on your report. You may have a bankruptcy that was not properly recorded. You may also have experienced credit fraud.
What Dave recommends is paying the minimum balance on all your credit, except for the smallest balance. On that balance, put as much as your monthly budget will allow. In addition, if you get extra money coming in for the month, put it on the smallest balance also.
Late Payments: People do not realize that their payment history can significantly affect their credit score. Every bank or lender provides a due date for making a payment but they also provide a grace period before which the late fees is levied. This is where people make mistakes. They
If you need money for something other than your living expenses, then credit cards and personal loans may be the way to go. If you need money for your living expenses, then you need to improve your budgeting, and you may benefit from an overdraft rather than a personal loan. An arranged overdraft may be suitable if you are having money troubles. If you are having trouble making ends meet, then credit card or personal loan is not the answer because they will increase your monthly outgoings, which will make it harder to make ends meet. Is one line of credit better than another?
Originated by John Moody in 1909, the Moody’s rating system provides investors with grades to evaluate the creditworthiness of securities to sell to investors. Like we discussed in class, there are nine grades that range from least risky to most risky (“Ratings Definitions,” 2014). Prior to late 2007, Moody’s was a highly trusted rating company.
claimed for an eligible student for four years of higher education. To be eligible for the American Opportunity Credit, a student must not have completed four years of college, enrolled in at least one academic school year, and maintains at least half-time status. Drug convictions are not eligible for the credit. An eligible person can claim the AOTC if they pay qualified education expenses or pay the education expenses for an eligible student. The student must be yourself, spouse, or dependent for whom you claim an exemption on your tax return. As an example,
3.) How much time do you have? Depending on your current situation maybe you have three years to repair your credit. How ever if you're trying to make a big change in a year or less you're going to need all the help you can get.
Your credit score is one of your most important financial attributes. Fortunately for those who are unsatisfied with their credit rating, there are plenty of options available. Improving your score is an attainable goal that everyone should aim for, even those who are content with their credit rating.
They then changed this. The minimum needed credit score used to be 620 points, but it was changed to a minimum 500 points without a down payment. The average person then assumed that since the bank was allowing them to take the loan out, they could afford it. They assumed that the bank knew what they were doing. The lender would then do things such as buy a new car or house, because the bank allowed him to believe that he could afford it.
Ritchie, Patrick. "Credit: The Foundation of Borrowing." In The Credit Road Map: A Practical Guide for Navigating Your Way to Good Credit, 21-23. Tempe, AZ: Success Road Map Press L.L.C., 2006.
This includes debts, installments, loans, credit limit, etc. Personal identification. Social security number, addresses, employment history, name, etc., are some of the things you will find in this section. If you want to see a full detail of what all these means and other information, you can download a PDF report from Experian at the following address: http://www.experian.com/credit_report_basics/pdf/samplecreditreport.pdf. Read the different parts of your credit report from the above so that you can familiarize yourself with them.
Understanding My Credit Rating When you talk about personal credit and money management, you often hear about credit score. Now if you're new to the field, you might know little about credit score or personal finance for that matter. A credit score is a quantitative or numerical summary of all your credit report or credit history.
1. Improving Credit Score If you are looking to obtain a mortgage loan in the near future, then you should start to improve your credit score right now. You need to spend some money and find your current credit score. Then,
Suffice it to say that properly managed credit card use may improve your credit rating, and responsibly using XXXXX may help you improve your credit rating with your credit card.