What Your Credit Score Means and Ways to Improve Your Rating
Alternate title: All about credit score ratings. - How to fix, raise, increase, improve your credit rating and score. A consumer information page about saving money.
All About Credit Ratings - Introduction
Credit scores range from 300 to 850.
The credit score sub-ranges listed below are approximations, but they will give you a good idea as to where you stand. There is a small overlap in the ranges. This has to do with the fact that some loan officers will look beyond just the number and actually read the report; but unfortunately, there are many more who won't.
Some aspects of this page are in a humorous light, but all of it is of a serious and informative nature.
There is also a worthwhile section on maintaining and increasing your credit score.
Credit Scores at 300 something, or in the 400 range, or at 500
If your credit score is at or below 500, you are basically dead in the water. If you are in this category, then as far as society is concerned, you are not worthy to live. Not only does society classify you as unworthy, poor and destitute; it will do everything in its power to keep you that way.
Want a job? Forget it. Employers don't hire people with credit scores at and under 500. As far as society is concerned, you have no right to be employed. [Year 2012 Update: Some states have changed their laws in order to fight this practice. In California, for example, it is now supposedly illegal for an employer to use your credit score as a factor in their hiring decision.]
Want to rent an apartment? Forget it. Apartments don't get rented to people with credit scores at and under 500. As far as society is concerned, you deserve and should be homeless.
Want to buy a car, get a checking account, or get a credit card? Forget it. Forget it. And forget it.
[Do you think there just might be something wrong with this system? Many people will agree with you.]
FICO is the mostly commonly used credit score used by lenders. Components of the FAIR ISAACS Credit Score (FICO) are:
- 35% Payment History
- 30% Amounts Owed
- 15% Length of Credit History
- 10% Types of Credit Used
- 10% New Credit
These are the components and numbers that Fair Isaac have publicly claimed. However, it is reasonable to suspect there are some additional, proprietary nuances behind the scenes.
Credit Scores between 500 and 600 and up to 620 inclusive
Attempting any kind of business transaction when your credit score is within the 500 to 600 range is extremely difficult. If you are able to initiate a transaction, you will be financially raped as to interest, fees, and/or security deposit amounts.
Credit Scores between 600 and 700 and up to 719 or 720 inclusive
In this range society doesn't consider you unworthy, but it will tell you that you are. Negotiation is possible here. Sometimes, just say no. It might work. It might not.
Your New Apartment
You've moved into your new apartment and want to sign up for utilities. The conversation will generally go as follows:
You: “Hi! I've just moved into my new apartment and need to sign up for electricity (or gas, cable, phone, etc.).”
The Utility Company: “Hi! With your credit rating we are going to have to require a deposit."
You: “I really can't afford that at this time.”
The utility company: “That's too bad.”
Your New Car
You want to buy a car. Here is what will generally happen:
You: “I love this car and think you are giving me a good deal. I'll take it.”
The Car Dealer: “With your credit rating we will have to charge you “double” the usual interest rate.”
The Car Dealer: “Because we consider you a credit risk.”
You: “So you think I can handle the higher monthly payment, but that I can't handle the lower one?”
The Car Dealer: “Exactly.”
[On a more serious note, you should never get an auto loan from a car dealership anyway.]
Your New House
You go to buy a house. Here is what will generally happen:
[See car scenario above]
Credit Scores at and above 720 - The Land of 850
When your credit score is in the 720 to 799 range, better interest rates on loans start becoming available to you.
And if your credit score is actually in the 800 range,you are a Living God and can do no wrong. The lending institutions you are doing business with will send little angels to hover around you and to protect and nurture you wherever you go.
How to Protect / Raise Your Credit Rating andScore
- Pay your bills on time. This one is an absolute imperative.
- Keep your debt as low as possible relative to your credit-line. This one is also an imperative. Maxed-out credit-lines are death.
- Having an excessively large credit-line total available will also lower your score. Excessively large credit-lines tend to be used and potential future creditors are leery of that.
- Don't suddenly go and close most/all of your credit card accounts. This will mess up your debt-to-limit ratio and lower your score significantly.
- Apply for credit as seldom as possible.
- Co-signing loans is a bad idea.
- Credit card companies tend to rob their customers blind when it comes to cash advance fees. So don't do that.
- Avoid those loan places you see in the mini-malls like the plague.
- Don't have anything to do with department store credit cards.
- Student loan debt can hurt credit scores.
- Reconcile your credit card statements every month. Inaccuracies, invalid charges, overlooked-no-longer-needed monthly charges, and outright ID theft happen much more often than you might think.
- Check your credit report at least once a year. Fatal inaccuracies occur often in these reports. In fact, credit reporting agencies are famous for it. You are legally entitled to one free credit report a year from each of the credit reporting agencies.
- Pretty much all of the reputable consumer-related-advice websites recommend annualcreditreport.com as the place to get your free credit reports. The site will subject you to a lot of advertising pitches along the way, but eventually you'll get the free reports unscathed.
Year 2015 Update : Did You Know...
The following entities can and do often report delinquent debt to the credit reporting agencies.
- The IRS.
- Utility companies.
- Cities and counties as to unpaid parking tickets.
- Cities and counties as to unpaid library fines.
- Cities and counties when you are unable to retrieve your car from impound.
Federal Trade Commission
Consumer Credit Bill of Rights and more...
The Federal Trade Commission
You will find worthy information from the FTC at A Summary of Your Rights Under the Fair Credit Reporting Act.
The FTC has all sorts of other need-to-know information about the various aspects of dealing with credit and lots of other things. This FTC info page will get you started. Also make use of their search function at upper-right.
Many states more than likely give you additional rights. For that, proceed to your search engine. If you live in California, for example, then enter the phrase: "California credit bill of rights site:.gov" (omit quotes). All sorts of state info will pop up, including credit card, credit score, debtor, debt collection, car loan, home loan, etc.
Please share this information so as to help others. The more people who are knowledgeable, the better off we all are.
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