Is Good Credit Score Really Making Any Differene In Loan Approval?
Is a good credit score really necessary? This may seem like a strange question, but the answer is a definite yes. You may not receive a loan approval with a poor credit score and if you are approved your interest rate will be high. Generally, a good credit score is 700 or above which will provide you with the credit you need and at a reasonable interest rate.
Most credit reporting agencies break down credit scores for home mortgages by using the following chart:
750 – 850 is excellent 4.28 interest rate
700 – 749 is good 4.50 interest rate
652 – 699 is fair 5.32 interest rate
550 – 624 is poor 5.89 interest rate
300 – 549 is bad no loan * (based on 2010 rates)
Each interest rate point will cost you up to $1000 depending on the amount that you borrow. If you do not have the resources to make purchases with cash, you do need to have good credit. To further understand your credit, agencies and FICO scoring provides percentages for each item on your credit report. Payment history is 35% of your credit score, balances owed is 30%, credit history or how long you have held credit is 15% of your score, the type of credit accounts you hold is 10%, and if you are trying to get new credit all the time your this reflects on your credit report as 10% of the score.
The first step in determining what your credit score should be is to take advantage of a credit history check. The federal government and the consumer protection agency legislates that credit reporting companies issue you a free yearly credit report. You can get these free reports by registering at www.annualcreditreport.com. Take advantage of this benefit and find out what your scores are to begin taking responsibility for your credit score. In order to get a “good” loan you will need a good FICO score and knowing that score is helpful. If you find that your score is low and you are prohibited from buying a home or a car, there are tactics that will help you develop a good credit score. Begin by paying every debt on time, stop applying for credit, and negotiate with collectors to pay your behind debts. When you negotiate, make sure you request that bad marks be taken off your credit reports.
A good credit score takes time to develop and get back. No one can legally remove any accurate information, but you can ask credit reporting agencies to investigate the information in your file. There should be no charge for this service. Most credit score repair companies use these same tactics of writing to the credit reporting agencies, requesting an investigation, and demanding removal of a poor credit listing. These companies do charge fees for this service. Help yourself by taking responsibility for your credit and begin to create a good credit score by letter writing, paying bills on time, do not apply for credit, and keep your credit inquiries limited.