What is a good credit score?

Your credit score is an enormously important part of the credit approval process. Most likely it is the first thing that a lender looks at when judging whether or not to approve you for a loan, and it might be the last thing they look at. In fact, often times your application for a loan or credit card will not get as far as reaching a human being before being denied. Just by doing a quick background check with your Social Security number, and automated system will filter out applications to deny borrowers with a credit score that does not meet their minimum requirements.

So what are the minimum requirements? That depends. A perfect credit score is an 850 by the Fair Isaac Corp. – the leading credit score model. It is nearly impossible to have an 850 score, and you don’t really need to bother on trying to get your score that high. Generally speaking, anything above a 770 will get you approved for the very best loan rates. And since you are approved for the best rates with a 770, chances are a higher credit score will not help you out any further.

While even a 730 is still deemed “excellent credit,” according to E-Loan, the he median credit score in the United States is around 720. If you have a 720 or above you will still be able to receive favorable loan rates and should not have any trouble being approved for a loan.

Back to the original question, what is a good credit score . . . if you fall below a 620 credit score, you should be concerned. This tells creditors you are a risky borrower and there is a greater than average chance that you will not repay your debts in a timely matter.

In that case, a borrower with a 620 credit score will have harder time getting a loan for a car, mortgage or even a credit card In addition, rates will be higher in order to offset the risk to the lender.

Your credit report is used by lenders to determine whether you are a fit candidate for a loan. If you want to buy a house or car in the future, now is the time to start working on cleaning up your credit report. Obtain a free copy of your credit report and look it over to see what the creditors use to determine your eligibility for loans.

There are probably both positive and negative items on your credit report. The positive items, such as staying current on your accounts, being employed, and having checking and saving accounts, will stay on your credit report indefinitely. You want these items on your credit report because they help to counteract whatever negative items you have. There is no need to act to have them removed. However, if you see that you are missing accounts that you have good history with, even if it is simply a small store card, you should contact the creditor to get them added to your report.

If you have made any financial mistakes in the past, they are probably present on your credit report. Negative items such as credit card defaults, repossessions, foreclosures, and chapter 13 bankruptcies will remain on your credit report for seven years. Chapter 7 bankruptcies will stay on your report for ten years, while any unpaid tax liens will stay on your credit report for fifteen years. These items remain because creditors want to see what risks they may take on when lending money to you.

If negative items have remained on your credit report beyond the limits specified above or if they are inaccurate, it is time to dispute them with the credit bureau. You will need to do so with each of the credit bureaus individually if the item existed on all three credit reports. Disputing items has been made simple and can be done easily when pulling your free credit report. You should expect to hear back from the credit bureau in about a month. When you receive the documentation on what corrections were made, check to make sure that the problem has been completely taken care of. If the report is still not quite accurate, you can do a second dispute by personal letter. Explain the problem fully, providing documentation to back up your case. Make sure to keep copies of all correspondence with the credit bureaus.

If you have defaulted on a credit card or other loan, you may want to talk to the creditor to negotiate a deal to get your account up to current. However, if you do not plan on paying the debt, do not contact the creditor because it may restart the clock for having the item dropped from your credit report.

There are several other steps you can take to build your credit. Open a checking or savings account with a bank or credit union. If you have enough self-discipline not to rack up debt, get a credit card and use it sparingly, always paying off your balance in full each month. Using credit responsibly can go a long way to proving that you are capable of handling larger purchases.

It is a good idea to check your credit report on a yearly basis to make sure that everything is doing well. Take advantage of the free yearly credit reports from each of the three major credit reporting bureaus. If you have further questions on how to build or clean up credit, talk to a credit counselor.

Never before has building up your credit score been as important as it is today. It isn’t just about buying homes and fancy cars; it takes good credit just to get through the days and provide the necessities of life. Without a decent credit score (at least), you stand very little chance to advance in our capitalistic society. It’s easy to mess up your credit score too. Millions of people are stunned when their credit score drops as much as one hundred points for a single missed or late payment! Fear not – there are ways to build your credit score back up again. The laws aren’t impossible to get back on the good side of – even if it seems that way sometimes.

You can begin the credit repair process by obtaining a free credit report from each of the major credit reporting bureaus: Equifax, Experian and TransUnion. You need to have fresh information if you want to be able to accurately monitor your efforts to build your credit score back up.

Tip 1: Start off by establishing a checking and a savings account if you don’t have them. Potential lenders see bank accounts that are kept in good standing as signs of stability. Don’t let your balances go negative.

Tip 2: Make your payments for loans, credit cards, rent and even utility bills on time – every time. Even if you have had poor records in the past, you can begin to build your credit score back up by establishing timely payment habits. Be assured that when you apply for credit, these things will be considered.

Tip 3: Realize the two most important factors that determine your credit score. They are: (1) the timeliness with which you make your payments due, and (2) the amount of credit that you have that you actually use. When you have credit cards, lenders like to see that you do not always use what is available to you. This shows restraint on your part. This helps to build your credit score back up.

Building your credit score back up to a desirable level is not an insurmountable endeavor; you can do it! Be patient and exercise responsibility. Put yourself in the position of a lender and ask yourself whether you would loan money or extend credit to you. When you do have credit extended to you, protect it and be responsible with it. Your credit rating has a lot to do with the amount of happiness and freedom that will be granted to you in life.

A negative credit history is the single largest factor that can prevent you from getting an apartment, loan, or job. This is because all insurance companies, banks, landlords, and prospective employers check out your credit card report before sanctioning a loan or offering a job. Therefore, it becomes imperative to fix your credit report if there are errors in it. Your future transactions depend on your past history.

First of all, you should immediately order for a free copy of your credit report from any of the three major credit bureaus: Equifax, Experian, and TransUnion.Once you get your copy, review the mentioned information thoroughly. This means you need to check for mistakes in the following sections: Personal Information, Monthly Account, Public Information, and Inquiries. You must also ensure that there are no spelling mistakes in your personal information.If you find errors in your credit report, you should inform in writing any of the three credit bureaus immediately. Also ask for an acknowledgement of receipt. However, waiting for a mistake to be corrected by this channel will take about 30 days, because this is the time the credit bureaus take to conduct an investigation with the information providing agencies. You can also fix the mistakes on your own or solicit the services of a rescorer.

Fix it Yourself

After reviewing your credit report, contact the creditors and argue your case with them. If you succeed in getting the errors fixed, the concerned information will be removed from your credit report. Remember to take a letter from the creditor acknowledging the error. Also, remember to keep track of all the communication that takes place with the creditors or the credit bureaus. That means all communication should be in writing and you must have the receipts, which you can provide as proof to the credit bureaus, if the need so arises.

Rescorers

If you are not up to the task of dealing with the errors yourself, you can take the services of rescorers. These rescorers act as middlemen between lenders and credit bureaus and speed up the process of error correction. These brokers collect proof from the borrowers and pass on the information to the credit bureaus. If the credit bureaus confirm that an error was made, they will update the borrower’s credit report to reflect the change.