What you should know about your credit score
Credit score measures how financially responsible you are and how effectively you can handle cash. It is one of the key factors that lenders take into account when you approach them for credit. So, it is important that you “nurture” it. Following sub prime mortgage crisis, taking out a loan is no longer an easy thing to do as lenders have adopted very stringent measures for the same. Keeping a close watch on your credit score is important because it determines whether you qualify for various financial benefits.
Credit score also referred to as FICO score was developed by Fair Isaac Corporation. It usually ranges between 300 and 850. If the FICO score is above 750, you are most likely to enjoy favorable rates when you try to avail fresh credit.
If you have late payments as well as delinquencies to your credit, it will remain in your credit report for a period of 7 years. Whether you file Chapter 7 or Chapter 13 bankruptcy, it remains in your credit report for a period of 7 to 10 years. So, whatever you do financially gets reflected in your credit report.
Beware of scam artists promising to fix credit: You may come across many companies that will claim to repair your credit within a short time span. But don’t give in to their persuasion. It isn’t possible to remove negative information from your credit report unless you actually work for it. There are no shortcuts to a debt free life. It is important to identify scam artists so that you are not taken for a ride.
What you can do to keep your credit score unhampered: • You are entitled to get a free credit report from the 3 credit bureaus. The 3 credit bureaus will give you a credit report once in 12 months. So, get hold of your credit report and check for any anomalies.
• Aim for a higher credit score. The higher your credit score the better it is. Your credit score should be 700 or above. This will enable you to enjoy several financial benefits. If the credit score is less, you are looked upon as “risky”.
• Beware of identity theft. If you come across any information in your credit report that may not be familiar, report the same.
Credit score is an important parameter that will determine your credibility depending on a number of factors. These factors are regarded as components of your credit score. Check them out.
1. Payment history accounts for 35% of your credit score
2. Outstanding balance makes up 30% of the credit score
3. Duration of credit constitutes 15% of the credit score
4. Fresh credit determines 10% of credit score
5. Credit mix influences 10% of your credit score
So, if you can work upon the above components, you don’t have to worry about not being approved of a loan at convenient rates.
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