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Credit Rating

It seems that today a person’s credit rating is very important. Most people borrow money to purchase large-ticket items such as cars and homes, not to mention that many people also use credit cards to make everyday purchases for what they want and need. A credit rating is extremely important financially for most people yet many are not as familiar with it as they could be. For information about how to improve credit rating see here.

A credit rating is a financial measure that is defined as a number that fits into a scale that compares how a person manages debt in their life compared to others and compared to the expected norm. The actual credit score is called FICO and it only calculates how you manage debt and how you have managed debt in the past.

Credit Rating Agencies

There are three major and well-known companies called credit bureaus that keep track of these scores. The companies are Experian, TransUnion and Equifax. You can get a credit report that has your composite credit rating from each of the three credit bureaus. The scores will vary depending upon the credit bureau and many lenders will actually take an average of the three. The FICO score is used to determine your creditworthiness when you make application for mortgages, credit cards, car loans and more. In some circumstances the FICO score has even been used for employment and insurance purposes, even though when someone is unemployed and needing a job they may have difficulty paying their bills on time. Unfortunately, using a credit rating for employment purposes is a form of discrimination against the long-timed unemployed. But often a credit rating is used for unfair purposes. That is one reason why it is very important for you to keep your credit rating as high as possible. Having a bad credit rating can hurt you in numerous ways.

The range of the numbers of a credit rating or the FICO score will be within a spectrum of 300 to 850. 850 is the high and essentially “perfect” yet very few people achieve that actual score. And while having a “perfect” score may sound appealing, the fact is that if your score is on the high end you can qualify for all of the same benefits and advantages that a perfect score will allow so striving for perfection may be pointless.

Credit Rating Check

Any score over 750 is considered to be excellent and you will rarely have any trouble qualifying for anything with that high of a score. However, most people will be able to qualify for a mortgage will a score of 680 or even lower sometimes. A mortgage application will typically count in other things also such as how long you have worked at your job and if you have any money saved for down payment but the credit rating is crucial. Even if your job is great and your income is great if your credit rating is bad you probably won’t get the mortgage. In order to qualify for the very best mortgage terms you will need a credit rating of 700 or higher. If you do not like what you see in your credit score, there are a number of companies that offer their credit repair services to help get you back to a more respectable number.

The FICO score and your credit rating is based upon a mathematical formula that takes several different factors into consideration. Payment history, including any late or non payments, the length of your credit history, the amount and type of debt that you currently owe, along with recent inquiries all affect your credit rating. Bad credit decisions and histories such as charge-offs, bankruptcies, foreclosures, repossessions and judgments also have a huge effect on your credit rating.

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One Response to "Credit Rating"

  1. […] credit score. Timeliness makes up 35% of your credit score, and when you pay on time, this triggers positive activity on your credit report. But paying on time isn’t the only influencing […]

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