Credit Scores: What You Need to Know
Tuesday Oct 11th, 2016
They’re like report cards for grown-ups. It’s a three-digit “grade” you get on a scale that ranges from 300 to 850. Your score indicates your creditworthiness to potential lenders, banks, landlords, insurance companies, and even to some employers, for instance. I’m sure you know that the higher your score the better.
Where Can You Get Your Credit Report and Score for Free?
You can get your credit report from each of the t wo major reporting agencies— Equifax , and TransUnion —for free . But credit reports don’t include your actual credit score—you usually have to pay for those.
What’s a Good Credit Score?
Creditors establish their own guidelines and break points for doling out credit. But here’s what credit scores can mean for your personal finances:
300-580: You’ll be denied credit or will only be approved for the very highest, most costly interest rates.
581-650: You may qualify for credit at high interest rates.
651-710: You’ll qualify for credit at moderate interest rates.
711-750: You’ll qualify for credit at competitive interest rates.
751 and up: You’ll get the most competitive, lowest interest rates on the market.
For mortgages a score of 650 or up means Kingsway Elite is able to obtain the best mortgage rates for you - starting at 1.95% variable and 2.54% 5 years fixed - OAC, terms and conditions apply).
Someone with a credit score of 550 might be charged an interest rate that’s three to four percentage points higher than someone who scores over 750. That could translate into paying several thousand more dollars in interest for a $20,000 car loan or over a hundred thousand extra bucks in interest over the life of a 30-year $200,000 mortgage! That’s money you could invest for your retirement instead.
If your score needs a boost we are more than willing to review your report and assist you in bringing your score up in 30-60 days where possible - but here are some handy tips for you to be able to do the same thing:
Tip #1: Review your credit report from each of the two major reporting agencies closely. Then immediately clear up any errors, such as incorrect credit limits, late payments, or collection items that aren’t yours. Errors do show up on credit reports. Y ou’re never penalized for checking out your own credit report or score.
Tip #2: Always pay your bills on time. Delinquencies have the biggest negative effect on your credit score. If you simply forget to pay your bills on time or are guilty of being chronically unorganized, what are you thinking? I know a better way! Consider setting your bills up for automatic withdrawal from your checking account. If you have overdue bills, make plans to get them caught up. Did you know that having an account go to a collections ag ency is a blemish on your credit report that stays there for up to seven years?
Tip #3: Pay down your credit card balances. Reducing your overall debt that’s on your credit report is a very effective way to jack up your credit score. But if you don’t have the funds to do that, consider taking a loan from a family member or friend. That doesn’t reduce what you owe, but it does move debt off your credit report and give your credit score a quick boost.
Tip #4: Don’t close unused credit cards accounts. Canceling a card can actually lower your score. As you have less credit available that you are not using it can affect it and lower it . A better strategy is to occasionally use your older credit cards so the issuer doesn’t stop reporting your information to the credit bureaus. Having a long credit history helps increase your score—so remember that hanging on to older cards is a good idea
Tip #5: Never max out your credit cards. A good rule of thumb is to keep your balances below 30% of your credit limit—even if you pay them off in full each month. For example if you have a card with a $3,000 credit limit, don’t rack up a balance that exceeds $900. It’s better to have two cards with balances that are each below 30% of your limit, than to have one card that you consistently max out.