What is Credit
Credit is the ability of a consumer to obtain goods or services before payment, based on trustworthiness which is established and determined by an overview of your credit reports and scores.
What is a Credit Report
A credit report is a detailed report of an individual’s credit history prepared by a credit reporting agency (bureau).
Credit reports are sold to lenders to determine your eligibility for a line of credit, this process is called a credit pull (inquiry).
What is a Credit Score & What Are The Key Factors of a Credit Scores
A credit score is the number that is determined from analyzing the files in a credit report, the credit score represents the status of your credit report and the data reporting in it.
- The higher your score the higher your chances of approval
- The higher your score the lower your interest rates
- The FICO credit score range is 300 – 850
- You control 550 points
5 Factors of the Credit Score
- Payment History 35% = 192.5 points
- Amount Owed 30% = 165 points
- Length of Credit History 15% = 82.5 points
- New Credit 10% = 55 points
- Types of Credit 10% = 55 points
Benefits of Having a Good Credit Score
Low interest Rates
What is an Interest Rate?
Interest rate is the cost you pay for borrowing money, and is directly tied to your credit score.
The less money you pay on your interest rates the more money you have for everything else, high interest rates could be costing you thousands of dollars.
Better Chance for Approval
- Approval for renting will be easier.
- Approval for buying an automobile will be easier.
- Approval for buying a home will be easier.
- Approval for lines of credit will be easier.
- Approval for loans will be easier.
- A good credit score gives you leverage to negotiate lower interest rates on current, and new loans.
- You can get approved for higher credit limits.
Avoid Higher Security Deposits
- Some landlords may lower your security deposit depending on your credit score.
- Some utility companies won’t charge a security deposit when you have a good credit score.
- Some cell phone companies won’t charge a security deposit when you have a good credit score.
- A good credit score with good debt to income ratio give you power to sign & drive when buying a car.
- Mortgage approval odds are greater.
- A good credit score is something to feel good and be proud about, and once you reach it you should be happy for yourself because it takes hard work to get and maintain it.
Credit Score Ranges
Excellent: 800 - 850
Very Good: 740 - 799
Good: 670 - 739
Fair: 580 - 669
Poor: 300 - 579