A good credit score is more significant than ever. The credit crunch has raised the bar on credit scores. It’s getting hard to qualify for a loan, let alone a loan at a reasonable rate of interest these days. To do so, most individuals could have to improve their credit ratings. Raising a credit score results in more favorable interest rates.A poorly maintained credit rating makes borrowing money expensive. Fico ratings within the 650 range are problematic. When a Fico score enters 750 territories, that’s pretty darn good. An elite group of individuals make the effort to surpass 800. A man living in Arkansas aspiring to a Fico score of 850 is a textbook example of what it takes. His diligence could translate into a rich retirement.
Ways to get an 850 Fico score
A FICO credit score of 850 has been achieved by .5 percent of Americans, as outlined by Fico. A CNN profile of Chris Plepinski of Rogers, Ark., chronicles his quest to achieve that elusive number. Plepinski’s current FICO score is higher than 82 percent of the population at 813. Plepinski is destined to save lots of cash in the future, thanks to his stratospheric Fico score. Nevertheless, he told CNN that nothing short of eight hundred fifty will be satisfactory. His strategy involves closely monitoring each aspect of FICO’s scoring system. On a quarterly basis he re-evaluates his Fico position. To get as many points achievable, Plepinski tweaks his financial behavior accordingly. He once took out a auto loan despite the fact that he could pay cash, figuring that adding the variety to his credit mix could bump up his score.
Fundamental information about Fico ratings
A FICO credit rating is distilled from credit report data collected by the Equifax, Experian and TransUnion credit agencies. Bankrate.com reports that FICO scores range from lows of 300 to 400 to highs of 800 and higher. The number is a result of the following:
Payment history – 35 percent
Total debt load – 30 percent
Length of established credit – 15 percent
Types of available credit – 10 percent
Recent new credit – 10 percent
Using these factors as a guide, timely payments, reconciling overlooked payments, reducing balances on revolving credit (credit cards), paying down rather than transferring balances, staying from new debt and keeping existing charge cards nominally active are helpful for raising credit scores.
The long benefits of higher credit scores
A less than stellar credit score, according to Liz Pulliam Weston at MSN Money, can put the hurt on a person’s finances over time. One person muddling through at 650 was contrasted with a more organized individual who loved a 750 score. Weston ran numbers on the disparity of interest each could expect on such transactions as student loans, automobile financing, charge cards, mortgage loans and home equity lines of credit. Fast forward 50 years and the lower credit score got hit with $201,712 more in interest payments. Weston divided $201,712 over 50 years and figured an 8 percent average return. In interest saved, the higher credit score could allow a retirement account to grow to more than $2.3 million.
Find more details on this subject
CNN
money.cnn.com
Bankrate
bankrate.com
MSN Money Central
moneycentral.msn.com
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