Characteristics of a Person with a Good Credit Rating Score

Having good credit is a concept that many understand. Much like having good health or savings in the bank, it is something that all working adults would like to regain, maintain or obtain. But what is a good credit rating score? A person with a good credit score:

Knows their score

Generally speaking, if you ask around for individuals with good credit scores, you will discover that their scores are above 700 points. However, the points are not set in stone and can vary from one lender to another since everyone has personal opinions about what constitutes a good credit score. So to determine what your score is, carry out your research first to determine the criteria your lender uses so because most lenders will use their own criteria to determine whether or not they can facilitate that loan that you need.

Applies for a credit card

The credit card applied for has to be secure, especially if you are building your good credit score range from the beginning. A secure card should be backed by payment or deposit that you should pay upfront. The deposit will act as your credit limit.

Looks for a co-signer

A co-signer is someone that will be charged with the responsibility of paying your debt if you slack off. A co-signer should be someone dependable who will keep you on your toes in regards to payment.

Gets credit for paying rent

Each time that you pay your rent on time, you should report it to your rent reporting service as it helps to build your credit. On time payments, of rent or credit card bills, creates a history that shows you make all your payments on time which will qualify you for a loan should you need it one day.

Related Source: How Do I Look? The Image Portrayed By A Credit Score

It Is Possible To Fix A Bad Credit Rating

There is so much use of money and the sources of direct income are simply not enough. Even for people who have a steady income, there arises the need to have more to invest, offset bills and for others, just to take a vacation. At the time of taking credit, the borrower is more or less confident that they will be able to honor their end of the bargain but that is not always the case. The most unfortunate aspect of taking credit is that the repayment obligation must be met even if the circumstances at the time of the agreement have changed. What a good credit score does is to qualify a borrower to access more financing. With more financing, however, some people are unable to repay leading to the loss of good credit score numbers.

Just like circumstances change for the worst, they can also improve to enable a borrower to repay their facility. It takes a considerable amount of time to repair a damaged credit score and while some people claim to have attained good credit score numbers overnight, there is no quick fix as far as what a good credit score transformation looks like. The most practical advice for repairing bad credit is to be patient as one manages the facilities they have over time. The issue is not about the possibility of fixing a bad credit rating but on how it can be done based on the data which was originally used to arrive at a score. For people who are looking to fix their credit score gradually, the steps are simple;

Analyze the data in the credit report – There is no doubt that the credit report is a reflection of one or more facilities which have not been repaid. The first step in fixing it is to get a copy so that any errors that may be present can be disputed. Some of the most common errors that occur in credit reports are late payments and amount of money owed for each transaction. It is important that a credit report contains accurate information so that if a score is given, it represents a true picture of the existing situation. A good credit score range can only be obtained with good data.

Remember your repayment obligation – Some banks will have reminders sent out to the clients when the due date for an installment is fast approaching. It may be hard to have all the due dates and the amount at the top of the head so it pays to have some systems set up. Most people find that having a standing order that debits money directly from the borrower’s bank account to finance debt works better for them. While this option will not shorten the repayment period, it will certainly help in building a reputation with the lenders. This is the only way to ensure consistency which is what is a good credit score range is based on.

Reduce the money owed in debt – This will look good on paper but it is a different thing when it comes to doing it practically. Depending on the type of debt owed, many people are not only worried about not getting good credit score numbers but also the accruing interest that goes up provided the debt remains. Other than that, reducing debt is also satisfying at a personal level. How good is it to earn money and not think about the amount of money that should be set aside just to finance a debt? To make the significant improvement in this step, it is important that credit card use is stopped and any plans to seek credit for any reason is dropped. The credit report has all the answers as far as the accounts that need to be settled and how much should be paid at specific dates. It can be quite confusing to finance debt that is spread across various accounts and paid on different dates. Debt reduction has to be systematic so that there is the tangible improvement after a given duration. Tackling one account at a time has been proven to work for a lot of people; the repayment on one account is made exceeding the installment amount while the minimum payment for the other accounts is maintained.

The above steps will help to decrease the level of debt and this helps to show lenders the level of commitment to repay a debt. Getting good credit score numbers is however not determined by the manner in which existing debt is handled. Timely bill payment and repayment of credit within a short time are also practical ways of fixing a bad credit score.

What it Means to Have Good Credit Score Ranges

Credit score ranges allow individuals to determine where they fall on the credit scale. A range enables people to determine whether or not they have good or bad credit scores. There are different models used to establish ranges. However, the most common model used today is the FICO score range.

FICO Score Range

The FICO score range lies between 300 and 850. The range in which you fall determines what credit is accessible to you as well as how much interest you will pay in the long run. Lenders rely on FICO scores to determine whether or not one is worthy to receive credit. An individual that enjoys FICO scores of 800 and above typically experiences approval processes that are straightforward especially when requesting for new credit. On the other hand, scores of 579 or lower indicate a poor rating, which may cause lenders to reject any applications made for credit. FICO credit scores that fall below 579 are often as a result of significant credit issues such as lack of debt repayment as well as financial difficulties such as declaring bankruptcy. Although everyone should aspire to acquire and maintain a score of 800 and above, anyone that keeps a FICO score of 680 and above is considered to have a good credit standing.

VantageScore Model

Another consumer credit scoring model is the VantageScore model that also employs the same scoring range as FICO, with the range lying between 300 and 850. VantageScore is a relatively new concept; therefore, it has not been utilized or adopted by many lenders. Although both models use the same score range, they evaluate similar factors such as repayment history before approving someone for credit. Please note that the VantageScore model also has its own unique and separate ways of interpreting the particulars of one’s credit report differently.

The model you select is purely based on preference. However, it is important to track your score based on just one model instead of utilizing both so that you can monitor and keep up with your score efficiently.

Understanding the Impact of Good and Bad Credit Scores

Summary: Due to most these benefits that comes with good credit, it’s known that this comes with a lot of benefits. Having a good credit score is something to be happy about especially in a situation where you worked for it from bad to good. And for individual who have never experienced a bad score, keep doing what you are doing to sustain your score.

A lot of people still don’t agree there are so many differences between having good and bad credit scores. Anyone can survive with a bad score but is expensive and difficult way of life while a good credit score makes life easier and it is a great way to save money. Here are some reasons that clearly explain the difference between good and bad credit scores:

Lower interest rate on loans and credit cards

An interest rate is the extra charges you pay on the amount of money being borrowed by an individual. This rate is depending on good and bad credit scores. Someone with a good credit score will definitely qualify for the best interest rates and will make lower finance charges on loans and credit card balances. The higher your good credit score the less you will have to pay on everything else.

Increased chances for loan and credit card approval

An individual with history that is not so good will be reluctant to apply for loan and new card due to the fear that it might be rejected. Having good and bad credit scores doesn’t guarantee that lenders will accept the application because there are so many factors such as income and debt that goes into consideration during this process but a good credit score will definitely be an advantage for approval. A good credit score will bring confidence when it’s time to apply for a loan.

Better negotiating Power

When it comes to negotiating power, there a big difference between having good and bad credit scores, a good credit score comes with leverage to negotiate for a better interest rate on a new loan and credit card. While bargaining, an individual with good credit can always refer to better offers received from other companies. For someone with a bad score, most lenders will be reluctant to release a loan.

Increase card limit

Your capability to borrow is greatly dependent on your income and score. One huge benefit that comes with having a good credit score is that banks will always want to borrow you money due to the fact that you have shown your trustworthiness. Having good and bad credit scores will always bring you loans but the amount of the loan will be limited for a bad score.

Ease of apartment rental

So many landlords use good and bad credit scores when screening tenants. Someone with a bad score that was cause either by previous eviction or debt on rental balance will have a very slim chance of getting an apartment. A good credit card will help avoid the stress of looking for a landlord to accept a score.

Related Resource: What is a Good Credit Score Number?

Name(required)

Email(required)

Website

Comment(required)

Submit

Δ

How to Get Good Credit Using Credit Cards Good Credit

Summary: You need to be sure you are financially ready to make use of cards before going for one. This means you will adhere strictly to your monthly budget that will be able to make payments for every month. It should be known that credit cards good credit are not bad but once they are misused, they could put you in a big financial mess.

The easiest way to understand what is good credit is by knowing the importance of credit cards good credit. There is a big difference between having no history and having a poor history. Most people that lack the understanding of what is good credit will use end up not using cards wisely. It is very possible for an individual to get a mortgage without credit cards good credit. It could take a long time to get a lender but you will not necessarily have to pay a high-interest rate. Here are three easy steps to help you understand what is good credit using cards:

Manage the number of cards you use

It’s advisable not to have more than credit cards good credit. Having so many cards will have a negative effect on your report. You will likely say a store card comes with great discount but the truth is they don’t offer discounts for free. They understand that most people will not make payments for their balance in full every month so they make a lot more on interest than they are offering through discounts. It could be very tempting to spend money you don’t have especially during the sale. Ensure you go for a card which comes with very low fees and penalties.

Monitor your Credit Limit

You could contact your bank to prevent them from automatically increasing your credit limit. This will help you in controlling your spending when cards. You should consider putting it between $500 and $1000. This should be enough to cover your spending within a month using cards. Once you can focus on paying off these smaller amounts, you will have a better understanding of what is good credit.

Make full payment of your balance monthly

You can have a better understanding of what is good credit by making regular monthly payment. It is always advisable to make payments on time and in full every month. If you keep to a small budgeted amount every month, you will be able to make this payment. Avoid charging a huge sum for something you cannot make cash payment for that month. This is one very important step in understanding what is good credit.

Keep a low amount of used credit

Your score will be affected when you use a large amount or all of your available credit. Always ensure that you regulate the balance of your card to 30% of your available limit every month. Once it goes beyond this or once it gets to the limit, you will notice a drop in your score. With this in mind, you will be able to improve your score due to your understanding of what is good credit.

Related Resource: How to Identify the Best Credit Card for Good Credit

Understanding What Is a Good Credit Rating Score

Summary: If you have good credit rating, always ensure that you take the necessary steps to protect it by repaying your loans on time each month, refraining from obtaining more debt than is necessary, and keeping your other bills paid on time to avoid collections accounts.

Good Credit rating is usually being considered when you want to borrow money, either to purchase a car, get a mortgage or apply for a new credit card. When you have a good credit rating, you will get these at a lower interest rate, you won’t need a co-signer and also you won’t need to pay a large some for a home when you get approved for the mortgage. Understanding what is a good credit rating score is a vital responsibility for your financial well-being. Once you get approved for a loan, a line of credit or a credit card, your report will be available with a bureau. This report will give lenders a breakdown of how reliable you have been with your past payments. Making a mistake at the early stage could also lead to a reduction in your score later. A credit rating score is a three digit number which is as a result of the mathematical algorithm gotten from the way you handled loan in the past. This rating is usually used to determine the likelihood of you paying for a loan on time in the future.

There are certain factors that are being considered by agencies to determine what a good credit rating score is. The agency takes into account the person’s history of past borrowing and early payments of debt. Once a payment is missed or a loan is being defaulted, your rating will be negatively affected. The industry also checks the future economic potential. If it has a very bright future, the rating will be very high but if the applicant’s economic potential is not bright, the rating will be lower. This credit rating is seen as a set of numbers maintained by credit reporting agencies. When you have a high score, you are seen as being responsible with funds and this will in turn lead to a lower interest rate when you apply for loan. Some factors are always considered when calculating an individual score, these include: payment history, amount owed, age of credit history, new credit and the type of credit. They don’t all have the same effect on the score, some factors are considered more important than others.

Credit rating for an applicant is considered based on the amount of research being carried out by the agencies. A borrower try as much as possible to get the best possible rating which will in turn lead to the best interest rate by lenders but rating agencies also tend to review the financial situation of the borrower to determine if the borrower can make timely payments of the debt. Having a good credit rating doesn’t only increase the chances of your loan being approved by a borrower; it also reduces the interest rate when the loan will be repaid. Considering the fact that so many companies depend on loans for start-up and their activities, being denied a loan could have so much effect and paying at a high interest rate comes with great risk. Understanding what a good Credit Rating Score is also affects the chances of a potential buyer buying a bond. If the rating is not good enough, it tends to be a more risky investment and comes with a high probability of paying back the bond. It’s very important for a business to remain diligent in other to have a good credit rating. Credit rating is never the same, the change always based on new data that is being received. One bad debt can greatly affect a good credit score and it takes a lot of time to build up. If an Individual has good credit but a short history, it won’t come with so much positive remarks compared to someone with same score but with a longer history. Borrowers want to be certain that an applicant can maintain a good credit score over a long period of time. Often, the borrower should make a fixed payment or a given amount every month other the period the loan is being serviced. The amount of money that will be available for the borrower and the interest rate that will be charged on the loan will be dependent on the score rating of the individual.

The Impact of Late Payment on your Good Credit Score

Summary: Making late payment is very dangerous to your habit which could, in turn, damage your actions such as neglecting an account until it becomes delinquent or sent to collections. An account in collections may remain on your report for seven years and cause even more damage than a late payment.

When you make a late payment on your card, mortgage or loan, your good credit score is usually affected and also the overall health of your good credit. Even if you are just two days late or a month late, delaying payment of your bills would have an effect on you for months or even years from now. Every bank and lender go through your previous payment history to ascertain how reliable or trustworthy you are before deciding if you will be approved for a loan or not. When you have a long history of payment made on time, this will show you are a responsible and reliable borrower. If you have a long history of delayed payment, this will suggest that you will most likely not refund the loan and will result in a loss to the bank or lender. When you are unreliable with on time payments, your financial institution will be reluctant to relieve funds and also a lot could contribute to late payment.

You might be charged an extra fee for late payment when you make payment even a day after the bills should have been paid. This fee could be between the range of $25 and $35 and will be sent with your next bill statement. But if these payments of late fees continue, some other additional fee will be included in these late fees.

An increase in your interest rate, making payments to your creditors late will cause an increase in your interest rate which will often reset your interest rate to a penalty (or default) APR. For credit cards, the penalty APR is often as high as 29.99%, which means you’ll pay significantly more in interest on your outstanding balance if it’s triggered. If you have a promotional 0% APR on a balance transfer card, paying late may also forfeit your 0% promotional rate and reset it to the default interest rate. This will definitely appear on your good credit is the payment is delayed for more than 30 days. All three major bureaus are usually reported which show that this will appear on your report. When you have a late payment on your good credit report, this will most likely be on your report for up to seven years.

Reduction in your good credit score, your payment information usually make up about 35% of your good credit score. This makes it one of the most important factors when calculating a good credit score. Having just one late payment could greatly lead to a decrease in your good credit score especially when you have a very high score. This will depend on how late your payment is, how frequently you pay late and what your score is, late payments can severely affect your credit.

How to Calculate Good Credit Score

Summary: Your good credit score is one important measure of your credibility and reliability. Your FICO score is a three digit number which lies between 300 and 850 and is usually calculated based on the metrics developed by Fair Isaac Corporation. The lower the score, the more risky a borrower will be in the eyes of the lender.

A FICO score which is created by the Fair Isaac Corporation is often referred to as a credit score. This score is commonly used to determine the creditworthiness of a potential customer by a lender when they want to take up a loan.

Even though Fair Isaac Corporation did not reveal the exact formula for this calculation, it is known that this calculation is broken down into five major categories with different level of importance. Here is a breakdown on the importance each factor has on your good credit score. Payment history is 35% of your score, Credit card debt and current loan accounts for 30% of your score, Length of history takes 15% of your score, type of account you open is 10% of your score and the age of the loan takes 10% of your score.

Payment History takes 35% of your score. This is a reflection if your payments were made early, how often this payment was missed, how many days after the due date bills payment was made, and how recent these payments have been missed. The higher the proportion of your early payments, the higher your good credit score will be. Every time this payment is missed, it affects the score negatively.

The Amount owed on loan and card accounts for 30% of your score. This is based on the total amount owed, the number and type of accounts you have, and the proportion of the money you owe compared to the available limit you have. A high balance and a totally used up your limit could negatively affect your good credit score but when you have a smaller balance, your good credit score can be raised as long is its being paid on time. New loans with short payment history will decrease your good credit score temporarily but when a loan is closer to being paid off, it increase the score and shows as a successful payment history.

The Length of your credit history makes up 15% of your score. When you have a long history of timely payments, the higher your score will be. It might seem like a good decision to avoid applying for loan and carrying debt but in the actual sense, it hurts your good credit score when you have no history to be reviewed.

Types of account take 10% of your score. Your good credit score could be improved by having a mix of accounts such as installment loans, home loans, retail and credit cards.

Recent Activities takes 10% of your score. When you open so many accounts with a short period or apply to open an account, it shows a sign of financial trouble which could decrease your score. But if you have been using a card for a long time and make prompt payments even after having financial troubles, your score will rise.

Related Source: Using Good Credit Card to Improve Your Good Credit Score

Reasons to Use a Good Credit Card for Good Credit Report

Summary: Your credit rating is only one part of what decides whether you get approved for a loan, and cards are only a part of the rating. Things like splitting a high balance on one card into two makes sense, but if you are holding too much debt on too many cards, you have to consolidate your payments on the card with the least interest and get rid of some of the principal.

With the drastic change in the price of houses, it has become a norm to get a mortgage. This has placed a great importance in having a good credit score. Here are some of the reasons why you should use a good credit card to boost your good credit rating:

For bank getting a credit card is a good move as long as it is being paid down regularly. Having so many cards is being seen as a bad sign by a bank. It usually reflects a potential financial crisis even with a zero balance. In contrast, credit card companies love customers who carry a balance as long as they pay the interest. If you only pay the interest and continue to carry a balance on your card, you will probably be offered a limit increase or another card. To a credit card company, the amount you owe is less important than the fact that you pay the interest regularly. Credit cards issued by stores don’t even put that fine of a point on it.

Most banks want a potential lender who regularly pays the interest and reduces the principal. Credit cards can be a good indicator of whether the potential lender can service the debt he or she is requesting. But cards are just one part of your overall rating. If you have taken a student loan, car loan, furniture loan, house loan, etc., these will also be part of your report. If you paid down these loans in timely fashion, this will count in your favor. A stable income is also a key factor for deciding whether you qualify for a loan.

If your cards are a significant part of your history, there are some things you can do to improve your good credit rating score. First, you need to keep you credit-debt ratio as low as possible on all of your cards – below 50% for sure, but below 30% would be ideal. And, once you have found a low-interest card you like, keep it. The cards that you have the longest history of regular payments with will help your rating. Pay off and cancel cards that have given you trouble. If you are carrying a balance of more than 50% on one card and are going in for a good credit report, it may be better to split up the balance between two cards. This will improve your debt ratio by increasing your available credit compared to how much debt you are carrying.

Related Source: The Impact of Good Credit Score on Mortgage

How to Establish Good Credit History

Summary: Your good credit history becomes very important when it is time to purchase a home or a car. At that point, a one percent difference in the interest on a loan will either cost you or save you thousands of dollars over the life of the loan. By keeping your eye on the goal-establishing and maintaining a good credit history-you’ll be able to borrow that money when you want it, at the most favorable terms and conditions being offered.

For someone who does not have a good credit, the best way is to start small. Getting a credit card or taking out a small loan could be a good starting point. But this will only count as long as your lender reports to one of the three bureaus which are Equifax, Experian and TransUnion or better still all the three. If this payment is not reported, the debt will only be accumulated and will not help build good credit. Only those credit accounts that are reported and repayment activities that will influence your good credit history. Here are some tips on how to establish good credit history and report:

You could get a secured credit card. This card is usually tied to an account. You make a deposit of a particular amount of money and charge up the amount. Whenever you default on your payment, the bank will refer to the money deposited to repay. After about 6-12 months of regular payment, you will be ready to move on to a regular card or store card. However, resist the urge to open too many store card accounts to take advantage of discounts. Every time you open one, it results in a report inquiry, which may affect your score.

When building credit, make payments for your charges in full at the end of the month. When you decide to get a card, make you always make payments in full when the statement arrives. Making payments of your balance in full shows the credit card company how responsible you are.

Making Timely payments one important aspect of building and maintaining a good credit score is the ability to make timely payments at the end of the month. By making these payments on time shows the lender that you have enough cash flow to cover your expenses. If your late payment is being reported to the bureaus, your score will be reduced and it will harm your report

Ensure your charges are within your credit limit. When boosting your good credit score, make sure your monthly charges are within your limit. This is because when calculating your score, there will be doubts when your balance is above the limit. Lenders will assume that you are facing financial difficulties and a doubtful borrower.

Steady review of your report. By doing this within a specified period, you will make a complete understanding of the information available in your report. Any slight error or negative report will lead to a damage of your history and score. So regular check will make you see the error and get it fixed.

Related Source: Good Credit Score Range