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Credit Score of 740 No Longer a Dream for Many Consumers

By Sally Maison
Published: Tuesday, January 12th, 2010

In a credit-driven society, a good credit score is not merely an advantage—it is a necessity. Those three-digit numbers given by Fair Isaac and Company (FICO) and the three major bureaus could spell the difference between paying an interest rate of less than four percent and being charged with a 24 percent rate. In order to get the best interest rates for card, mortgage, or auto loans, experts say consumers must have a credit score of 740. With the economy still trying to recover, that seems a pretty tall order—but not for those who know how to handle their finances well.

When the lending industry was at its peak, it seems that no consumer rating was low enough to get rejected. Unfortunately, what followed this unscrupulous practice of creditors and borrowers was a huge economic downfall that still continues to make its weight felt three years since.

Today, almost everybody is looking for higher credit ratings: banks, insurance companies, lenders, employers, and even the federal government. Fannie Mae has recently raised its minimum credit score requirement from 580 to 620. However, having a rating of 620 is not an assurance of better loan terms. It is merely the qualifying mark for most loan deals.

While new lending standards might seem very daunting, finance advisers assure the public that there is no need to worry. For one, statistics show that half of adult Americans are on the upper end of the FICO rating system. On the scale that runs from 300 to 850, the median credit score of American consumers is 720. This means that half of all consumers are enjoying higher rating, but sadly, the other half is on a struggle.

Despite struggling with their ratings, experts tell consumers that they can easily get better credit scores if they work on it. First, experts suggest getting one’s finances in order before even thinking about improving a credit rating. They explain that no one can improve his score if he keeps missing bills.

Secondly, experts say no one can improve his ratings unless he uses credit. Living on a cash-only basis can keep a person from acquiring debts, but it will not improve his creditworthiness since credit scores are largely determined by how well a person has managed his debts in the past. However, experts tell consumers that using credit is not the same with carrying a huge balance on a plastic. It could mean using cards for making little purchases and paying the balance on time each month.

Lastly, experts advise consumers not to expect for instant results since improvement in ratings come 30 days, at least.

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