Credit utilization makes up about 30% of your total credit score and yet most individuals do not comprehend what credit utilization is. The concept is pretty easy to understand and is expressed as a percentage. Generally, the higher your credit utilization percentage the lower your credit scores. Every tradeline that is on your credit report has a figure assigned to what credit is available to you. This would be the beginning loan balance or the credit limit on a credit card your credit cards. Same with a credit card. Now if you have paid on that mortgage and your balance is only $50000 this remaining balance is considered your Credit Debt . So if you have a mortgage for $100000 and your remaining balance is $50000, your credit utilization is figured as follows:
Credit Available = $100000, Credit Debt = $50000, Credit utilization is 50%.
Simply put, keep your credit usage low and it will help your credit score.
This means that if you have credit card debt , and you can keep it below 30% that will be best and make lenders much more comfortable when deciding to provide you with credit.
Mortgage lenders that see you keeping your credit utilization number down are more likely to provide you with a loan because it will appear to them that you are able to manage your credit properly. Pencil out what your credit utilization percentage is and then focus on trying to lower that percentage. Continue reading ‘What is Credit Utilization?’ »
Posts tagged ‘Credit Repair’
Cutting Back to Save My Credit.
A lot of people are learning that in order to improve their credit score, they need to get their spending habits under control. Many Americans learn the hard way that they need to learn how to cut back to help improve their credit score. Start with creating a budget that will help lower your expenses. Even if you are adding an additional $10 a month to reduce your debt, it will help. Once you see that you are not missing that $10 you can start to increase it a little more each month until you are making double payments to your balances. This will help you reduce your debt faster.
Pay attention to your credit cards and their interest rates. It is a good idea to pay down the credit cards with the highest interest rates first. By getting those credit cards paid down and possibly paid off you will save money on the interest you were paying. You don’t want to close out those accounts though because you may want to keep them for.
After you have setup a budget and started working on reducing your debt, you can start planning to save some money to help you build that financial nest egg. Medical emergencies, unemployment or simple accidents can cause major issues if you aren’t financially prepared. Factor in what you spend each month on your mortgage, food, utilities, and gas. Sometimes it will feel that you are attempting the impossible but if you start small and try to improve each month it will become easier as you go along. Continue reading ‘Save Money by Cutting Costs’ »
If you look at your savings account and see it empty, it is time for a change. If you see that your debt keeps climbing, it is time for a change. Can you make a change and effectively help your financial situation? You bet you can if you want to make the change. Change is often not easy but it can be accomplished with dedication to the final outcome.
You must start by deciding what needs to be changed. Do you want to have an emergency fund built or do you want to reduce your debt? This question often gets financial advisors arguing. Which do you do first? My suggestion to you is to determine what you need to do first. Both of them are needed for a good financial future, but deciding which to do first is up to you. If you have a lot of debt but are managing it by paying it on time, then you might want to start working on your emergency fund. If you are having a problem paying on time or your balances are really starting to get up there, then reducing your debt should be your priority.
No matter which way you decide to go, the most important thing is to setup a budget. Once you have a good budget built and you are following it very closely, you will have that extra money to apply to either your emergency fund or your debt. Budgets are the key to getting a handle on your finances. There are many ways to start a budget and even quite a few software programs that can help you. You don’t even have to be a computer geek to use them. Any tool that you use to help you is a great tool. Continue reading ‘Time for A Change’ »
I’m sure we can all agree on how important it is to have a good credit rating. This is because your being viewed as worthy of credit is based on this credit rating.
A bad credit history or bad credit habits will place “black marks†on your credit profile. Late payments, having an account assigned to a collection agency, and of course bankruptcy will get you a bad credit rating.
Establishing good credit habits and therefore a good credit rating will improve your credit worthiness. This will be reflected in lenders extending to you substantially lower interest rates and better deals on credit offers. Continue reading ‘4 Steps to Get Good Credit’ »
Do you have a lot of debt? Too many unpaid bills? Have you lately faced a major financial set back, such as a bankruptcy? Have you simply not had credit long enough to set up, good credit? Have you defaulted on a loan, missed a tax payment, or recently been reported to a collection agency? The problems that cause your credit problems should confirm how you decide to better your credit score. As you read through this article and others I have published, highlight or make a note of those tips that apply to you and from them make a checklist of things you can do that would help your credit status, improve. When you look for, professional credit counseling or credit advise, counselors will generally work with you to help you develop a personalized method that specially addresses your credit problems and financial history. Now, with this article and others I have published, you can develop a similar method on your own – in your own time and at your own cost.
When developing your action plan, know where most of your credit score is coming from:
1) Your credit history (accounts for more than a third of your credit score in some cases). Whether or not you have been a good credit risk in the past, is considered the best measure of how you will respond to debt in the future. For this reason, late payment, loan defaults, unpaid taxes, bankruptcies, and other unmet debt obligations will count against you the most. You can’t do much about your financial past now, but beginning to pay your bills on time – starting today – can help boost your credit score in the future. Continue reading ‘A method for dealing with your credit score’ »
If you don’t understand how your credit score works, you will also be at the mercy of any firm that tries to tell you how you can improve your score – on their conditions and at their price. In general, your credit score is a number that lets lenders know how much of a credit liability you are. The credit score is a number, commonly between 300 and 850, that lets lenders know how well you are paying off your debts and how much of a credit risk you are.
In general, the greater your credit score, the better credit risk you make and the more probable you are to be given credit at excellent rates. Scores in the low 600s and below will often give you probelms in finding credit, while scores of 720 and above will normally give you the best interest rates out there. Nevertheless, credit scores are a lot similar to GPAs or SAT scores from college days – while they give others a quick image of how you are doing, they are explained by people in different ways.
Some lenders put greater significance on credit scores than others. Some lenders will work with you if you have credit scores in the 600s, while others give their best rates only to those creditors with very high scores indeed.Some lenders will look at your complete credit report while others will accept or reject your loan application based purely on your credit score.
The credit score is derived on your credit report, which consist’s of a history of your past debts and repayments. Credit agencies use computers and mathematical calculations to arrive at a credit score from the information enclosed in your credit report. Each credit agency uses separate solutions to do this (which is why you will have different scores with different companies) but most credit bureaus use the FICO system. FICO is an acronym for the credit score calculating software offered by Fair Isaac Corporation company. This is by far the most used software since the Fair Isaac Corporation made the credit score model used by many in the financial industry and is still acknowledged, one of the leaders in the field. In fact, credit scores are frequently called FICO scores or FICO ratings, although it is important to realize that your score may be tabulated using other software.
One other thing you may want to understand about the software and mathematics that goes into your credit score is the fact that the math used by the software is based on research and approximate mathematics. This is an important and easy concept that can help you understand how to improve your credit score. In understandable terms, what this means is that your credit score is in a way calculated on the same principles as your insurance premiums. Your insurance company likely asks you questions about your health, your lifestyle habits (such as whether you are a smoker) because these bits of information can let the insurance company know, how much of a risk you are and how likely you are to make substantial claims, later on. This is based on research. Continue reading ‘Where do credit scores come from ?’ »