The Meaning Of A Credit Score

The credit score measures the financial credit worthiness of a borrower. With credit score information, the lender assesses the risk involve in lending sum of money to the borrower. The Credit Bureaus and Fair Isaac Corporation closely guards the mathematical calculations. The calculations involve the analysis of large financial data. And, the public may not know how the Credit Bureaus and Fair Isaac Corporation arrive to the score. Anyways, the calculations are too difficult for the public to understand.

The lender will know how much loans, down payment, fees, interest rates, and terms to offer to the borrower thru credit scores. The borrower receives better interest rates and lesser fees with a higher the credit score.

Credit Score of Fair Isaac Corporation

Fair Isaac Corporation is also known as FICO. FICO provides the best known indicator of financial credit worthiness to lending institutions. The FICO credit score ranges from 300 to 850. A credit score of 660 puts the borrower as potentially Subprime where are borrower with blemished and limited credit history. A higher credit score indicates better financial credit worthiness.

Most borrowers average from 600 to 800 credit score. Lending institution favors above 720 of credit score. In the United States, the borrower averages 680 of credit score.

The credit score represents 35% punctuality of payments, 30% amount of credit used, 15% length of credit history, 10% types of credit used, and 10% the frequency of credit application.

Credit Score of Credit Bureau

In the United States, the three main credit bureaus are Equifax, Experian, and TransUnion. The Equifax, Experian, and TransUnion can provide credit report to any individual once a year. The credit report shows the financial history of an individual.

The credit bureaus created their own credit score. The credit score ranges between 0 to 100%. The higher scores look better for lenders. Usually, the scores fall between 60 to 70%.

The final thoughts

The credit score does not include the age, race, job, income, education, religion, origin, and marital status into the equation. The Equal Credit Opportunity Act prohibits the use of age, race, job, income, education, religion, origin, and marital status to determine the financial credit worthiness.

The late payments on loans, absence of credit preferences, lack of credit history, and uncontrollable use of credit cards brings the credit score down. Without a credit history, the lenders would not know how the borrower handles their finances.

Cash Payday - Your Online Money Advantage

We all need advantages both professionally and personally, but when our funds are 'drying up' fast, and we have impending debts on the near horizon, the cash payday is what millions of us seek! Although, not a 'just born concept', payday cash loans are allowing people to leverage their paychecks to their maximum levels.

This is because lenders primarily look at your employment as grounds for approving or disapproving your application, and your paycheck is their security! The facts are that credit histories and 'fico scores' are generally irrelevant to the lenders who yield short term cash.

Cash till payday is the primary basis from a lenders perspective and they would much prefer that their customers make between a range of $800 to $1,000 per month. These are standardized income numbers across the industry and rarely do they come down from that range.

Moreover, your actual bank account is of vital importance to them as well because of their automated set-up that utilizes electronic funds transferring via direct deposit wires. Hence, if you don't have a bank account, you may find it a little more difficult to obtain a paper check in the mail.

Regardless of your economic status or sociological standing within your community, you have just as good of a chance as the next person to acquire funds against your next paycheck. That is the beauty of the internet's unbiased platform in that it doesn't distinguish any preconceived notions based on your physical appearance.

It merely couples you with a lender online that can deliver cash payday loans in not only a timely manner, but more cost effective one as well! If you are finding that this perhaps could be a good decision based on the information in this article, take the next step to obtaining cash against your subsequent employment check, and apply online now!

680 FICO Scores Are Now Considered Just Okay

That is the new target score. Even though a 580 score may still barely qualify, over 680 is where the most favorable rates and terms are.

Here is why:

Conforming rates and/or fees have added on for scores under 680. These fees range from ¾ of a point to over 2% if the loan-to-value is over 70% of the purchase price. What does that mean? Well it means that buyers could pay as much as over $6,000.00 more in upfront fees on a 300,000 mortgage than a borrower with a credit score over 680. Think that could break a deal? Not to mention that the lower the score goes, the higher the rates get. So not only are they going to pay more upfront, they will also pay more per month. The difference between a 620 score and a 720 can be the difference between a $300,000 and a $335,000 home for the same payment.

Also FHA has just initiated "Risk based" pricing as well. The upfront FHA fee will be substantially more for lower credit scores (under 680) and so will the monthly MI premiums. Once again, when the amount of money upfront necessary to fund the loan increases and the monthly payments increase the harder it is for the client to obtain favorable rates and terms, if a loan is possible at all.

What is necessary in today's market place is mortgage professionals who can help clients obtain favorable rates and terms while educating them about how to understand and manage their credit scores effectively. There is no reason for anyone to be a "credit score victim". A client's entire monthly budget is affected by their credit score. It has everything to do with the rates and terms they get on everything they finance from credit cards, auto and truck loans, lines of credit, any installment loan, insurance premiums and even possible employment. (75% of fortune 500 companies' check credit report prior to making a hiring decision and last year there was a 55% increase of employers checking). These can have a huge effect on the debt-to-income ratios when it comes time to obtain a mortgage. And the lenders have set that bar lower now than it has been in the past. Making few exceptions for DTI's that exceed 43% total expense ratio.

So what does all of this mean? Well, the lenders have money to loan and for great borrowers, it means they will have little problem obtaining financing. But what about the other 80% that don't fall into the "great" category? Help them get there. Make sure you have mortgage professionals who can help educate clients about how to maintain credit scores so they can be "great". Everyone wins!

5 Steps to Buying a New Car Without Regret

Buying a new car is a big purchase. While there are many things we'll buy during the year, your car is something you'll have at least for five years if you are like most people. For the majority of us we keep our cars for a very long time. But buying a car is a lot of pressure and many people are scared they will make a mistake when buying that car. How can you be sure you are choosing exactly the right car? Try these 5 steps to buying a new car without regret and you'll be driving along in the car of your dreams in no time.

Plan your car purchase. Even if your car purchase is unexpected because your current vehicle has broken down, you should still be patient with your car purchase. Give yourself enough time to think about what your family needs and how much you can afford. A great place to find reliable information about the cars you are considering is in the car forums on the internet. Here you will read what the owners really like and dislike about their cars. If you have another vehicle to trade in, you should consider selling it on your own because you will get a much better return on your investment. All of these things take some time, but they will help get the most out of your car deal.

Check your credit and finances for confidence and knowledge. Anyone buying a car knows that they will check your credit report. This is very simple as few of us can afford to buy a car for outright cash. Checking your credit report may uncover things you wish weren't there. Discovering them now gives you an advantage to fix and improve them. Hiding from your credit report or simply hoping that your credit report is okay won't help you a bit when you shop for a new car. Your credit history and FICO score determine how much you can borrow and what interest rates you qualify for. Knowing this in advance will help you predict what type of a car you can afford at this time.

Put some thought into your test drive. Some new car buyers are so excited to get their car that they barely pay attention to the test drive. They may do it - but they are just thinking about signing on that dotted line. Do your test drives at a time when you can really pay attention. Work all of the features in the car and see how easy or hard they are. See how noisy the car is. See how smooth the car's ride is. See how comfortable the car is to sit in. Try driving the car over different types of road and feel what that is like. Give yourself a good test drive so you know you are getting the very best new car for you and your family.

Be a confident negotiator. You don't have to be some slick huckster in order to be a good negotiator. In fact, you are better off being a confident and informed consumer if you want the best deal. Do your research to find what the car is truly worth and what you are willing to pay for it. Those are the most important things. It is also a good idea to act casual about the car, so that the car dealer doesn't know how excited you are to want to take the car home with you. The excited new car buyer is one they know will make any kind of deal. The more casual car buyer is one they may have to make a deal with - that's when you can walk away happy.

Look at at least six cars. Car buying can be tough and you should do some comparison-shopping. Try looking at least six cars so you have a sense of what else is available in your price range. Not only will this give you more data to think about, but you will also be able to compare the services of different dealerships. Taking the extra time to look at several different models will improve your confidence as a car shopper and sales negotiator.

Personal Vs Small Business Vs Corporate Credit Cards

I'm sure that anyone who has been on the planet for at least eighteen years, has received an offer to apply for a credit card. Television advertisements, internet advertisements, and credit card applications sent through the mail, are a constant reminder of just how embedded our society has become with the use of credit. I personally don't know any adult who doesn't have at least one active card. Not to mention the numerous car loans, home loans, personal loans, and business loans, that are all available to consumers. Let's take a look at three different types of credit cards.

First, let's take a look at the personal credit card. There are many different companies that offer personal cards. The rates usually range from nine to twenty percent. Many companies these days, are now offering zero percent balance transfers. This ranges from the life of the balance transferred, down to a few months, or maybe even two years. Many companies will offer low introductory rates, and then raise the rate after a certain period of time. What many consumers don't know about personal credit cards, is that many times, the card company will give a low introductory rate, and then raise the rate, if a customer's credit score changes. This is a very common practice, so one must read over the terms of the personal card very carefully.

Second, let's take a look at the small business credit card. The rates are usually higher than the personal lines of credit, due to the substantially higher limits. These rates usually range from twelve to twenty-five percent. The small business card also has limits that are substantially higher than the personal lines of credit. The limits usually range anywhere from fifty thousand dollars, up to several hundred thousand dollars. This type of card also allows for balance transfers, but makes it substantially more difficult to transfer larger balances. These cards have a more flexible cash advance feature, and a less stringent repayment policy. Many small business cards can allow the business to pay not just monthly, but also bi-monthly, or even quarterly. This can be a tremendous advantage to the small business owner, who usually operates as a sole proprietorship or a partnership. The limits are usually based on the personal credit scores of the owners and the amount of income that the business generates yearly, or quarterly.

The third type of credit card that we will take a look at, is the corporate card. These type of cards are extremely difficult to obtain. One of the reasons, is that the corporation has to establish a long credit history. This means that the corporation has to take out loans, credit accounts, and maintain a good credit history for a longer period of time, unlike individuals or small businesses. Another reason that it is difficult to get a corporate card, is that the corporation has to have a substantial amount of assets, and be profitable for anywhere from two to five years, before applying for the line of credit.

The limits on corporate accounts are anywhere from fifty thousand dollars to the infinite millions of dollars. As the corporation expands, the credit card company will usually raise the limits. This type of card also allows for balance transfers, but makes it substantially more difficult to transfer larger balances. The repayment terms are very similar to the small business credit card account holder. The payments aren't necessarily monthly, but may be bi-monthly and sometimes quarterly. The interest rates can be substantially higher than the small business, or personal lines of credit, but this is due to the high limits. The interest rates range anywhere from twelve to twenty-nine percent. Some companies have even been known to charge flat rates on credit lines to corporations. This usually occurs when a very large corporation wants to borrow a substantial amount of money against its line of credit.

So there you have it. Personal credit cards usually have lower limits and lower interest rates, and are paid monthly. This is in contrast to small business and corporate cards, which usually have higher limits with higher interest rates, and can be payed bi-monthly or even quarterly.

Credit Scores: Numbers That Matter

Getting something on credit is something that has become a necessity for many people nowadays. After all, it isn't everybody who can buy a house or a car outright for its cash price! To be able to purchase such high-ticket items, a person would usually apply for a loan. And people who are planning to apply for loans should always remember that having high credit scores would be in their best interest.

And it's not only lenders who consider credit scores an important part of a consumer's financial health. Insurance companies, utilities, and landlords also look at a person's credit score to determine the rate they will charge for services they provide. Even employers sometimes consider a potential employee's personal credit information among the criteria they use in their worker selection process. Obviously then, making sure that one has a high credit score would facilitate his or her efforts to get additional credit, a roof over the head, or a job.

A person's credit score can range from between 300 and 850. A score that is above 680 would usually enable a person to get loans, such as mortgage financing, at no trouble at all and at low interest rates. A score from 621 to 679 is still generally okay, but you would probably have to pay higher interest rates. If your score is under 600, chances are creditors will not approve of the loan for which you are applying.

Your credit score is calculated by Equifax, Experian, and TransUnion - the so-called "big three" credit bureaus. Contrary to popular opinion, these three agencies use the same formula to come up with a person's credit score; it's just that they give these scores different names. Experian calls it the Experian/Fair Isaac Risk Model; Equifax calls it the Beacon score; TransUnion dubs it the Empirica score. Sometimes, even though these agencies basically use the same formula, a person might find that he or she gets differing scores from each. This is because the information the agencies use to calculate a person's credit score may vary; it may be because one agency has more updated information, or maybe a creditor shared your data with one agency and not the other. In any case, the scores given the agencies will usually not have large discrepancies. Potential creditors will normally take the middling score and base your creditworthiness on that.

Just what are the factors that could negatively impact your personal credit score? There are several, and most of them are easy to understand - even prevent. Your history of making debt payments is an obvious factor, so is the total amount of debt that you presently have. The length of your credit history also affects credit scores; the longer your (good) history, the better. The kind of credit you have and credit accounts that you have opened in your recent history are also pertinent. However, it is not true that factors like getting a credit application turned down, your race, age, sex, level of education, or marital status affects your personal credit standing.

So if you find that your credit score could use some improvement, what are the best ways to go about it? Naturally, paying off your outstanding debts would be a good place to start. But don't make the mistake of closing an account whose balance you have finally paid off. A credit account that is in good standing would contribute to a higher score.

Also, be sure to make those credit card payments and other such payments on time. A delay of a day, a week, a month can have a snowball effect; a greater amount of minimum payments to make would only make it more difficult for you to come up with the money to pay. In addition, these late payments would only worsen the appearance of your credit report. Another thing that financial experts advice to help improve your credit score is to maintain a good mix of several types of credit. These can be revolving credit cards or installment loans. Having this mix demonstrates your ability to manage credit, which will be taken positively by creditors. Just make sure that you make the payments on time and to keep a healthy balance on these accounts.

Getting and maintaining excellent credit scores are not only important in today's world; they have also become a necessity. It's up to each individual, in cooperation with financial institutions and services, to take the necessary steps and precautions to make sure his or her personal credit status is seen in a favorable light.

Is Your FICO Score Above Or Below the Average American?

According to research from the large credit repository Experian, as of November 2009 the average credit score in America was 692. Experian uses the Fair Isaac Risk Model or FICO which is a credit scoring model. The scale ranges from 300 to 850. Today, a 692 is considered a B+ score. You need over 720 to get an A and over 740 to get an A+. 697 is considered "very good" and can still get you a loan with a pretty good interest rate.

Once you reach a score of 720, you are in the "excellent" range and can definitely qualify for loans at the best interest rates available. This is why it is so extremely important to stay on top of your credit and to have a good understanding of how credit scores actually work. Knowing your current status and setting goals for your future status can help you to save literally thousands and thousands of dollars in interest depending on how much you end up borrowing.

When it comes to mortgages, if you have a credit score that exceeds 620 and you can provide proof of enough income to comfortably handle all your debt, you should be able to get an FHA mortgage. But FHA loans come with 2 types of insurance that need to be paid- mortgage insurance premiums (MIP) and private mortgage insurance (PMI). MIP is an amount that is typically financed into the loan. It runs 1.75% of the amount borrowed. PMI usually will run .5% of the loan annually.

If you happen have an average American credit score, you can either be content with that and accept the fact that you are paying a little more on your interest rates, or better, you can begin working on your score to bring it up to a level that will qualify you for lower rates.

There are many ways that you can improve your credit score.

First of all, the easiest way to establish better credit is to pay all your bills on time. The timeliness of your bill payments accounts for 35 percent of your total credit score.

You should also try try to keep your balances at less than 50% of your available credit. The lower, the better. This calculation, which is averaged over all your open accounts, represents 30% of your credit score.

The next item to look at is how long you have had accounts open. The longer the history of an account, the more it will help your credit (provided that the payments have been made on time.) While there's not much you can do to change the length of your credit history, one thing you should definitely NOT do is close any accounts that have always been in good standing. This certainly helps older people more than the young but suffice to say - if you have some good paying accounts, keep them! If you have teenagers, work with them to start building good credit early on in life.

Having many sources of credit is usually a positive, as long as they have been managed well, meaning the payments have all been made on time. This aspect can account for up to 10% of your score.

Avoid signing up for multiple credit cards in a short time period. This will generate inquiries on your credit report. An inquiry by itself is not bad but if you have many inquiries it can lower your score. Limit applications to what you really need and definitely do not sign up for a credit card just because you get an application in the mail. Remember, Pre Approved just means that you live in a neighborhood where some of your neighbors exhibit timely credit payments, that's all.

So what do you say? Are you better or worse off than the average American?