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The effects of Crunch to Credit Scores

By Janet Lacey
Published: Monday, February 1st, 2010

A majority of credit account holders are having a hard time of time of getting low interests rates for their accounts. The recent crunch caused by the recent global recession has forced many account holders to exert extra efforts in getting and maintaining a good credit worthiness rating. Before the recession crediting and financing companies are settling for a loan applicant with a good credit score rating. But after the recession the crediting and financing companies that used to settle for a good credit worthiness rated loan applicant are now searching for the best credit worthy rated individuals.

The recession made most of crediting and financing companies more paranoid to overexposure to credits. Most of these companies set their qualifying FICO score a little bit higher than what most people think are good and enough.

In the United States alone 30 million card account holders are struggling even today to make their credit worthiness rating better. These millions of people have a credit score of 620 and below.

A 620 score used to be satisfactory but now it is a score that no account holder aspires for. Even if most crediting and financing companies have raised their minimum qualification in terms of FICO score, the general factors that affect the computation of credit score are still almost the same. The first step that everyone who would want to increase their score must do is to find ways of knowing where they are standing right now in the credit worthiness ratings. Free reports and scores are now made available to individuals as a right which is mandated in the FCRA.

The accessibility of these documents can make its owner see more often the points in their credit portfolio that they can make adjustments for its betterment. Nowadays, an excellent score will not only mean a way to have low interest rates on cards and auto loans. After the recession, having an excellent credit score became an express way of moving towards home ownerships.

The crunch also pushed crediting and financing companies to lobby a change in the computation of the worthiness rating score of an individual. This is the major change in the FICO computation formula, more weight and bearing is now being put on the payment history and attitudes of account holders. This constitutes the general law of increasing credit score.

Pay off bill on time and with consistency. It is undeniable that card debt payments will bear more weight as compared to other financed accounts like mortgages, student loan and auto loan. The high importance put on card make it advisable for card account holders to keep the ratio of their current and available balance at 30%. Revolving accounts bear a great weight in the credit history recording of the major bureaus. Keeping in track with their charged expenses on their card will help account holders a lot in controlling their debts. The payment manner that matters the most is in the last bill payment that the card account holder paid before he or she requested for his or her worthiness ratings.

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