It’s James here to discuss a topic you’ve surely heard discussed a million times. Nonetheless, due to its importance, I desire to stress to NeedMoney readers the importance of maintaining a good credit score. For the uninitiated, your credit score (often referred to as a FICO score) is a number assessed to you which purports to predict your creditworthiness. There are three companies which put out credit scores, and these are Equifax, Experian and Trans Union. These scores range between 300 and 900, but the vast majority of us fall in between 500 and 800. A credit score in the 700’s is a good target. So just how do these companies calculate these credit scores? The exact answer to that question is a closely held secret. The three credit bureaus fear that if the formula were to get out, then people would be able to figure out how to “game” the system.
Despite the fact that the specific calculations behind your credit score is secret, there are several well known ways to ensure it remains as high as possible. The first imperative is to ensure all of your obligations are paid on time. Your credit score is negatively impacted each time you make a payment late. Only a few late payments can really ding your score. Other tips to maintaining a high credit score are more complicated. Experts advise that you should not “max out” all of your available credit. If you’ve run all of your credit cards and lines of credit to the max, then lenders view you as a more substantial risk. Also, you should regularly check your credit and make sure all items on it are correct. Oftentimes, people suffer from erroneous information on their credit report and never even realize it (except for bearing the cost of higher interest rates on their loans). This leads me to the ramifications of bad credit which i’ll discuss in my next post here at NeedMoney.