WHAT IS A GOOD CREDIT SCORE?

Credit score ranges are rather straight-forward and applies to most lending programs. The higher the score, the better your credit rating-and the higher your credit worthiness. The scale runs from 300 on the low end to 850 on the high end with the median score in the U.S. falling right around 720.

Part of the mystery behind credit scores is that there is no one particular scale for determining whether or not a credit score is "good." However many financial experts agree that there are some basic guidelines. Generally speaking, credit scores of 800 and above are nearly perfect and most scores of 720 or higher will garner the best mortgage rates and lending options. Credit scores between 750 and 800 are considered to be excellent; credit scores from 720 and 750 are good to excellent; those ranging from 690 to 720 are considered good; and borrowers with credit scores ranging from 620 and 690 are fair credit risks. A credit score below 620 is considered poor.


WAYS TO BOOST A CREDIT SCORE

If you don't have a good credit score, there are ways in which you can work toward improving it. For starters, make sure to pay all of your bills on time. Avoid collections, missed payments and late charges if at all possible. Make sure to steer clear of your max credit line. Keeping your debt too close to the maximum limit will raise red flags. Also, if you're planning on buying a home or another large purchase that requires a credit check, don't open or apply for any new credit accounts within 90 days of the purchase. New accounts and inquiries into your credit knock your score down even further.

The simple answer on how to get a good credit score is to avoid taking on any additional debt, paying the debt you do have on time and working on lowering your debt to maximum credit amount ratio.


WHAT IS A FICO SCORE AND WHAT FACTORS EFFECT IT?

FICO is a mathematical model that is used as a tool for lenders to qualify prospective loan applicants.  Mainly three credit bureaus provide this data depending on the loan applicant's credit bureau.  Here are the United States locations:

• Transunion:  Precision (formerly EMPIRICA), Midwest area
• Experian:  FICO Advanced Risk Score (formerly FICO), East/West/South area
• Equifax:  Pinnacle (formerly BEACON), East/West/South area

A FICO score is what your bank, mortgage loan companies, and merchant use to determine the your credit worthiness.  Your credit report contains credit data including FICO scores,which the lender uses to evaluate you as a  credit risk.  Late payments lower your FICO score but prompt regular payments raise a FICO score.  The credit user may have a low score, but that can change if you re-establish a good track record. 

Your credit report contains FICO scores that are calculated from various credit data.  The data is grouped into five main categories:

• 35% being your payment history
• 15% being your credit account history
• 10% being new credit
• 10% being types of credit
• 30% being your current debts

Payment history includes information on specific account payments, delinquencies, and amending of delinquencies.

Credit account history includes account activity since the beginning of each account opened.

New credit is the number of new accounts opened, new credit inquiries, type of accounts, and re-establishment of good credit following past payment delinquencies.

Types of credit includes information of specific kinds of accounts used such as credit cards, lines of credit, mortgage loans, and retail accounts.

Current debts are amounts owed on specific types of accounts, account balances, percentage of credit cards used, and loan installments outstanding. 

But as aforementioned, other factors, not just FICO scores, are used by lenders to evaluate the credit behavior of a prospective borrower including:

• A combination of several credit factors, specific to your credit needs may be different than another's credit needs.
• Income status, length of present job, and type of credit requested are considered.
• Late payments may lead to a bad credit history, but you can improve your FICO score by re-establishing credit with a track record of prompt, regular payments.
• If you are new to credit or have not used credit much, the weight of the 5 FICO categories may differ.

In summary, a FICO score is just one part of a credit report that a lender looks at when loaning money to a prospective borrower. Other credit factors are taken into consideration. You can raise your FICO score by re-establishing credit, meeting or exceeding a credit account's, payment installment requirements.

HOW OFTEN DO CREDITORS REPORT TO THE CREDIT BUREAUS?

Creditors are required to report to the bureaus every single month but most of them are NOT allowed to tell you when they actually report to the bureaus. 

Remember these two words "rapid re-score".  A rapid re-score will force the bureau to update your file in about 3 days. 

HOW DOES THE RE-SCORE WORK?

Rapid Rescoreis a way of updating your credit score prior to the next time the tradeline would report to the credit bureau.  It is typically used when there is a positive change to an account that is not reflected on the credit report and when the change could provide a positive impact to the program being offered to the borrower.  Probably the single most frequent use would be to show a lower balance on a revolving debt.

The basic process is the same for each credit provider.  Once a tradeline has been identified, an updated statement or letter from the account holder is obtained.  Paperwork from the credit provider is filled out and returned along with the proof of change to the account.  The credit provider researches and verifies the validity of the update and adjusts the score based on the updated information.  The credit provider then notifies the lender of the change.

This process has helped many borrowers obtain financing much quicker and at better rates than they could have hoped for several years ago.   A little something you might keep in mine.