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Importance of Having a High Credit Score

By Andy Snyder
Published: Thursday, April 29th, 2010

This article would like to give you a credit score advice so that you ca improve it and able to get a high credit score. Information in your credit report is the basis of your credit score.  The three major credit reporting agencies each have version of the credit score but they based it on the original Fair Isaac scoring method.

The Equifax applies the beacon system, TransUnion uses the classic FICO Risk system and Experian employs an Experian/Fair Isaac RISK system. However various lending companies use their own scoring method scoring method which they may add information about your income and how long you have been at the same job.

Make sure that you understand what credit score is, which is different from your credit report. Credit scores are based on formulas that use the information in your report, but they are not a part of your report.

The first credit score advice you should remember is that credit scores are not fixed.  This is because they are calculated based on your current credit report. Based on those changes on your current credit report, your lender will also change their calculation every time your credit report changes.

The second advice is to care about your credit because you could end up paying for a clearly low credit score. Worse is, you can not get your loan for your car or house or if you do get the loan, you can end up paying a high interest.

Your lender keeps an eye on your credit score. If it decreases then your lender will interpret you as a credit risk.  They can give you high interest rate to your loan and your monthly payments will jump. Unlike with high credit scores, they can get a lower interest rate.

The third credit score advice is to consider the relationship between credit score and interest rates.  Take this example of how interest rates for a car loan can vary based on your credit score. For a 36 month new auto loan, you can only get a 6.674 interest rate when your score is around 720 to 850,  but if your  credit score is around 500 to 589 you can get as high as 18.597 interest rate.  For a 48 month new auto loan, if your credit score is 720-850, you can get an interest rate at 6.678 but if your score is 500-589 only, interest rate will be 18.598.

When it happens that you have a low score, the fourth credit score advice you can do is to have a good list of reasons why you have low score.  You can a have a chance to turn your score around. Some lending companies have their own scoring methods that might increase your score. Nothing is guaranteed but taking this step would certainly can not hurt your score.

The last credit score advice is to maintain good paying attitude. Punctual payment is the most effective way to have a high credit score.  It is the weightiest element of your score which is 35 percent of the total score.

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