When it comes to you FICO score, no number is more important to you and how it will affect you financial life. In these tough times when the economy has been hit hard by the credit crunch, obtaining loans will be more difficult than ever. Every point on your FICO score is critical in getting you the most competitive interest rates available.
Since your FICO score is sort of like your credit report card, back in 2006 Fair Isaac started to work on a new system of evaluating credit to better reward those responsible credit holders. The new system that they finally put in place can easily gain you up to 25 points with very little effort. The main goal is to become what they call a “good risk borrower”.
These subtle changes is what everyone should read and learn about.
Isolated Delinquency – Believe it or not, there are a lot of responsible individuals who manage their finances quite well and take their credit history seriously. Like us all of though, they might be a time when we forget to pay a bill. Either it got lost or overlooked. With the new system a one time late payment of more than 90 days will not affect you as much as before. This oversight is now referred to as an “Isolated Delinquency” Do not get this confused with late payments under 90 days. If you continue to pay late you will regret the consequences. Paying bills on time is still needed to maintain that outstanding credit score.
Become Diverse – It was often critiziced if you had to much credit. In that I mean, mutilple credit cards, auto loans & mortgages. This thinking has changed and it is now encouraged to hold a combination of revolving debt & installment loans. Revolving debt being credit cards and installment debt being your auto loan(s) and mortgage. This gives the impression that you are capable of managing multiple accounts.
Be careful though. With multiple accounts, lenders do not want to see the balances near the max. As a matter of fact, even if you only have one loan account it should not be near the max. There needs to be some wiggle room so you do not come off looking like someone who cannot manage their debt. If you do have multiple accounts spread the balances over these cards.
Don’t be afraid to shop around – I never understood this with FICO scores. Why is it a penalty on your credit every time multiple credit inquiries are performed? With all the credit card offers that you find in the mail how do they expect your credit not to be investigated. Fair Isaac realized this and now credit inquiries will no longer weigh as heavily on you score. This only makes sense since we have far more accounts today that in the past.
Benefits of using a Debt Consolidation Calculator
Related Posts: