Why Credit Score Matters
If you have ever tried to apply for a car loan, a mortgage, insurance or rent a residence, you would know that your credit score plays a great deal in whether you can be approved or not; and in case of a loan or a mortgage, your credit score also determines what interest rate you can get. The individuals with great credit can enjoy lower interest rates while those individuals with lower credit rating will receive higher interest rates.
What is Considered a Good Credit Score
So let’s get to it as many are asking these days what is actually considered a good credit score. The FICO credit score ranges from 300 to 850 and although there is no specific guide stating what is considered a good credit score, many professionals agree that a FICO score in the range of 720-730 is considered a good credit score. If you are not sure what your credit score is you can get your credit score for FREE.
What Credit Score Do You need to Get a Mortgage
A score of around 620 is considered a baseline for getting a mortgage in the conventional sense, meaning from a bank. Many mortgage firms and brokers will consider offering you a mortgage for scores that also falls below 600; however, you may be asked to provide other incentives such a larger down payment or a cosigner and you can always bet that your interest rate will spike as your credit rating drops.
How Your Credit Score Is Determined
Knowing your credit score is only half the story, you need to understand how your credit score is determined so that you can take the correct steps to improve and build your credit. Your credit score is determined based on the following:
- Paying bills on time – How often you pay your bills is an important factor that the agencies use to set your credit score
- Your debt Ratio – Many agencies use the model of comparing your outstanding debt to your credit limit, for instance if the amount owed on your credit card is close to your credit card limit that will negatively impacts your credit.
- Your credit history – Your credit score looks at how you have handled your financial responsibilities. If your credit history is short such you just started using credit cards or you are a new immigrant, the credit agencies will give you a lower credit score.
- Recent credit inquires – Although looking at your own credit report and credit score does not hurt your score, applying for too many accounts that result in various institutions checking your credit will negatively impact your score.
- Type and number of credit accounts – Although having a credit cards or an installment loan can establish and improve your credit (given that you make payments on time), having too many credit cards and accounts will negatively impact your credit.
How to Increase Your Credit Score Quickly
Any negative item on your credit history will remain for at least seven years. The only way to rectify this faster is if you can show that the information is inaccurate or expired. In fact, many individuals will have some inaccurate and erroneous information on their credit report.
Thus, the first step is to order your credit report so that you can see what items negatively impact your credit. According to the federal law, you are allowed to order your credit report for free once a year. Once you have your credit report, go through it carefully to see if there are any incorrect statements. Inform the agencies in writing of the inaccurate information along with the copy of any supporting documents (never the original).
If there are any issues that have been resolved between yourself and the original creditor but is not showing on the report, you may have to contact the creditor and request them to send you a written statement indicating that the issue has been resolved. You can then send a copy of this statement as a supporting document to the agencies and request them to update your report.
How to Order Your Credit Report
- If you are a resident of United State – The federal law under the “Fair Credit Reporting Act” allows you to order your credit report for free once a year. You can order your free credit report by visiting the AnnualCreditReport.com which is the ONLY authorized source.
- If you are a resident of Canada – You can get your credit score from each agency either by mail, fax or through the Internet. However, the only way of getting your credit report for FREE is through the mail. You can get an instant copy of your credit report online but some fees will apply. Below is the information for the credit bureaus in Canada:
Tel: 1-866-525-0262 (except in Quebec)
Tel: 1-877-713-3393 (Quebec residents)