Bestcreditsite.com is your simplest guide to understanding credit
issues, including improving your credit score, good and bad debt and
credit card issues.
The ability to obtain credit
and the search for "good interest rates" is part and parcel of modern
living and "getting ahead." We may have long-established credit, or
have a few blips on the credit landscape. or are new to credit,
but all have long-term goals that involve "credit," or our "credit
score" or "credit rating," or knowing what's on our "credit report"
that contains our "credit history."
The capacity to realize major goals e.g. buying a car, buying a house,
renting a decent apartment, or just being tired of high-interest rate
credit cards, can be improved by improving that thing called
a "credit score."
What is a credit score?
The credit score assigned to an individual is a number that
lending organizations, landlords, and just about anyone on whom your
financial future and goals depend on, use to determine your "credit-worthiness."
In short, the number tells them how likely you are to be able to pay
your rent, make car payments or mortgage payments etc.
The system was developed by the Fair Isaac Corporation (FICO), and
is generated by the 3 major credit-reporting agencies: Experian, TransUnion
and Equifax.
Most people in the U.S. have scores that fall between 600-800. Anything
above 720 is considered to be good. The higher the number, the more
"creditworthy" you are. Having a lower number could mean being denied
for loans, or even if approved, having to deal with higher interest
rates. Even a few points up or down can make a difference in your
interest rate.
The single number that is called the credit score is a result of the
whole credit history, which
is the history of how we use credit, have made payments, have made
late payments -- from utilities, credit cards, student loans to other
things credit-related.
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What is a credit report?
Your credit history is shown on a
credit report (depending on how extensive it is) which will
show pages and pages of your credit history, including account numbers,
dates, and amounts.
Can I see my credit report?
Yes. By law, everyone is allowed to see his or her own credit report
***ONCE*** a year.
This will not cost you anything. To get your free credit report, go
to http://www.freecreditreport.com.
Type this in carefully, as there are many scammers who rely on typos
to scam you into paying for a credit report.
In 2003, there was an act of Congress that passed amendments to the
Fair Credit Reporting Act, making the above not only possible, but
advisable.
For more information, also check http://www.annualcreditreport.com.
You will find that you will be directed to a secure site designed
to give you the information that your need, while protecting your
privacy and your rights.
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Why
should I see my credit report?
- Because there often are errors on a credit report
that you will want to fix.
- Because there may be items on there that can be fixed
with advance planning, once you know what shows up. For example, look
at your balance to credit-limit ratio. If you can get your balances
down to under 50% of your credit limit, you will have a higher score.
Or you missed a 30-day payment deadline but your report shows it as
90 days. This can be fixed. Check http://www.money.cnn.com
- Because nowadays, identity theft has become a huge
issue. Identity theft means that someone is posing as YOU, using your
social security no., and possibly running up huge balances on credit
cards which you don't even know about. Look at http://www.money.cnn.com/2006/04/03/pf/saving/willis_tips/index.htm
http://money.cnn.com/2006/03/13/pf/trusted_id/index.htm
How do I improve my credit score?
1. Maintain
relationships with creditors. The longer your affiliation with your
creditors, the better you score. This accounts for 15% of your FICO
score. There is no need to close open credit cards (e.g. store
cards), if you are not using them. This is unused credit, and that does
not hurt your score.
2. Pay down your balances to at least under 50% of the credit limit.
You will then also have a lower income to debt ratio, which also looks
a lot better.
3. Start keeping track of paying your bills on time, so that the next
credit report will look a lot better. You can do bill payments online,
and set automatic payments for certain dates, so that you will not forget.
4. Do not be in the position of constantly making credit inquiries,
applying for new credit etc. Each act requires a peek at your credit
history/report, and the more inquiries, the worse it looks for you.
Remember, you are entitled to your ONE free annual report, with no penalty.
5. Keep track of your credit. Even if you do not have an auto loan,
or some hefty credit history, how you juggle student loans and watch
the balances on one or two credit cards does affect your score. By the
way, a good way to start along the road to getting your good credit
history if you do not have much of one, is by opening a store credit
card, even one with a low credit limit. Being able to make timely payments
and not maxing out that card puts you on the road to a good score.
What is "good" and "bad" debt?
Revolving credit (credit cards and unsecured loans), if not managed
and allowed to rocket in debt balances, is considered to have a bad
impact on the credit-utitlization ratio.
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Instalment loans (mortgages, auto loans) are considered
differently, but will factor into the income-to-debt ration. A home
equity loan can be considered an instalment loan, if it is a sizable
withdrawal for a home improvement project, college funds, auto purchase
etc. Small withdrawals are considered as revolving credit.
What is credit counseling?
Credit counseling can be both good or bad. Basically, the person goes
to an agency that will negotiate with the creditors to lower interest
rates. The client cuts up cards, and presents a check to the agency
every month, out of which the agency will manage payments. Remember
that the credit agency charges the client, but also gets a cut from
the credit companies, which would much rather collect than not. Therein
lies the conflict of interest.
For more information, check:
http://www.money.cnn.com/
What is important to know is that you CAN manage your debt yourself
by negotiating with the credit card companies and making a plan yourself
to make the ratios mentioned above look better. If you do decide to
go for professional credit counseling, do check National Foundation
for Credit Counseling (http://www.nfcc.org)
and cross-check with the Better Business Bureau, at http://www.bbb.org. At least,
you will have access to complaints filed against credit counseling agencies.
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What is the scoop on credit cards?
The interest you pay for your credit card is determined by your credit
score. The problem is that there is no regulation for the credit-card
industry. Interest rates can change at any time, and when you sign on,
you will have agreed to this unpleasant small print. Make sure to check
your statement every month. And don't forget to check that credit report
every year! It is good to have credit, as long as you handle it properly,
and do not get in way over your head!
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What about Home Equity Loans?
Home equity loans are a good way to tap the equity on your home. Interest
rates for these are lower than other types of loans. Frequently, after
an assessment of your credit score and an appraisal of your home, you
will be given a home equity "line of credit" which you may choose to
use for home improvements, college funding or even the purchase of a
car. The good thing about the home equity loan is that the interest
is tax-deductible. Therefore, accountants do frequently advise that
a smart way to buy a car is to use the equity on your home. Beware of
loan organizations that offer you up to 125% of the value of the home,
and as noted above, the percentage of the amount you use to the available
credit does impact on your creditworthiness.
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is for sale: contact info@bestcreditsite.com
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TOPICS or FAQ's
What is a credit score?
What is a credit report?
How do I improve my credit
score?
What is "good" and "bad"
debt?
What is credit counseling?
What's the scoop on credit
cards?
What about Home Equity
Loans?
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