Chances are you have a good idea of exactly what where your credit score lies. It’s just that little number, following you around everywhere with its big, sad eyes, and it might be 600, it might be 700, or it might be even higher – but does it actually matter? And do you actually know what it is and why it matters?
How credit scores are calculated
The simplest explanation: your score is just your credit report’s numerical representation, based on mathematical formula developed by the Fair Isaac Corporation (now simply FICO). Three credit report bureaus exist – TransUnition, Equifax, and Experian. All of them select credit scores based on information from your score (compiled by FICO), but they each use a different proprietary formula. It’s possible to have three separate credit scores, but as you can probably guess, a higher score comes with a better report.
Why your credit score matters
The first look a prospective lender will take before approving a credit application is right at your credit score. The range can go down as low as 300 and up as high as 850 – and a score higher than 800 means you are clear when it comes to lending. On the other side of the spectrum, if your score is lower than 500, you might have problems getting credit. Lenders will see you as someone at risk not to pay them back, and the credit they do give you will be at a high interest rate.
Reasons for bad credit scores
You might lack any sort of credit history, you may have defaulted on personal loans, dealt with the pains of a foreclosed home, filed bankrupt, or been late making payments on existing debts. These are all the types of things that contribute to a low score.
What you can do about your bad credit
The first thing you need to do is learn your credit score. Check out www.myfico.com – if you sign up for a trial, only two-weeks long, of the FICO Score Watch, you can get your score for free. If not, it’s only twenty dollars.
If you find out that you do, in fact, have a poor credit score, there are ways to improve that. There are things called ‘secured credit card’ – you deposit cash to the company issuing the card, and the card is then charged until reaching a zero balance. A large number of these cards are available, but be sure to check out fees before signing up for one, as some of them can soar fairly high.
Think about credit in a different way
Although it might sometimes feel like free money, you have to remember: it’s the exact opposite. You don’t want to use credit for emergencies, unless there are absolutely no other alternatives open to you. In an ideal world, you would never put anything on credit unless you could immediately pay it in the same month to avoid keeping any kind of balance in the future, but in the real world, there are problems, some self-inflicted and others brought upon us by powers beyond our control. But one thing you can do is avoid shopping splurges. This isn’t just when you go on a wild shopping trip. It applies to smaller things – buying a round for your friends, eating out big one night, or purchasing tools to keep yourself entertained. No matter how it happens, not being careful about splurging can rack up some serious credit debt.
Debt consolidation can be your rescue
At times it might feel like you don’t have a way out. Your poor credit score comes from your debts, and you have trouble paying your debts – it can be a painful cycle, but we can show you the way out. Our debt relief professionals offer you a simple way, 100% satisfaction guaranteed.
If ever, you grow dissatisfied or jaded with the debt relief programs we recommend, canceling out is free – you’ll see neither fees nor penalties come your way. We are confident in the help we can provide to make you debt free in reasonable time, and in the process, we’ll save you thousands. Fill out the forum on this page or dial our toll-free phone number, and we’ll give you even more information. It might just be the smartest decision you make this year.