Credit Score

 

Interest rates are at all-time lows right now, but you want to be able to get those good deals. You credit score is going to determine whatever rate you’re going to get on mortgages, credit cards, everything that you want to purchase. In fact the lower the score, that’s the less house or car that you can afford. So it’s very important for you to be acquainted with that score and what it means for you.

 

It’s called a FICO score, and that comes from the company that designed it (Fair Isaac Corporation). Fair Isaac came up with this numbering system. The scores range from 300 to 850. Scores below 720 will result in higher rates, and you’re going to pay more. Half of the people out there have a score below 700. A third of us have a score between 550 and 699, which is not a good score.

 

If you have those low scores and you need a credit card, you will probably get approved (it’s easier with a credit card) even with a lower score, but you may have to apply to several companies to get someone to sign you up. Expect your rates on those cards to be above 17%. You’re going to pay that penalty.

 

If you want to buy a car, that poor credit rating may mean you don’t even get a loan. If you do, we’re seeing average rates for those poor scores of 13% or more. So you can forget that 0% interest rate if you have a bad score. That’s only for the people with the best scores.

 

If you want to buy a house, well, if you have a score below 680, you probably won’t get a loan at all. In fact, last year, 90% of the mortgages that were granted went to people with high scores, so it’s very important to keep that score high.

 

What is your number? Well, you can pay for that score. With any of these credit reporting agencies out there, if you pay a fee, they will calculate that for you and tell you what it is. If you are turned down for credit by anyone, based on the latest laws, you are entitled to get a score to actually see what it is. Understand that different ratings agencies will give you different scores, so there will be a range. That score doesn’t mean anything by itself. It depends on what credit you’re applying for: with a credit card, it’s not as big of a deal; we step up to a car, it’s more important; the longer term mortgage, it’s very important.

 

There is a site called www.annualcreditreport.com, and you can get a free credit report, but it’s not your score. In order to actually get that score, you’re going to have to pay.

 

 

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