A good credit score is a key ingredient to successfully applying for and getting approved for home, auto and other loans. It is important to understand, though, that many lenders use different formats for calculating credit scores, so it is essential to ask the questions that will enable you to learn how lenders arrive at their conclusions. Here are the answers to common questions about credit scores, what they mean and how to improve your chances of getting approved with the right lender.
Many people are surprised to learn that how lenders arrive at their conclusions about credit histories is based largely on information contained in your credit report. Banks and other lending institutions rely on your credit history to decide whether or not you are a good risk for them. This assessment is based on many factors, including how long you have been paying bills on time, the number of accounts you currently have open, and how much debt you owe. If you have poor credit history or delinquent accounts, the calculation used by lenders will consider these negatives to lower your credit score.
How do they arrive at these conclusions?
The way that lenders arrive at their decisions about credit scores is to apply a mathematical formula to your personal information. Most commonly, this formula uses the total amount of debt you have as the basis for their calculations. If your debts are closer to the maximum amount of credit available to you (for instance, if you have several credit cards with balances on them that total over ten thousand dollars), your score will be calculated to be lower than a person with good credit. If, on the other hand, you have little debt to begin with, your score will tend to be higher. One question that many consumers have is “How can I improve my score?”
The most common answer is to get copies of your credit report from each of the three major credit bureaus: TransUnion, Experian and Equifax. Each of these companies is legally required to provide you with a copy of your report once every 12 months at your request. You can then go through each of the reports and look for items that may be in error. In general, mistakes will be found if you have late payments, pay high interest rates or defaulted on a loan. If any of these things are found, you can dispute it with the lender and will send you a letter to advise of the error.
If you have been turned down for a loan or credit card, don’t give up hope yet. There are some other things that can raise your FICO scores, such as having a clean credit history. When shopping for car insurance, renters insurance and mortgage, be sure to ask if there is a fee for the extra information. Most lenders don’t charge for credit scores, but many do offer discounts for student discounts, senior citizen discounts and military personnel discounts. You can use these discounts to increase your FICO scores.
It can be cumbersome to manually manage the day to day credit card spending habits. This is why TGS created its credit management app. This app takes the overwhelm and procrastination out of budgeting. Use this app as a budgeting tool and credit management and you can also donate to your favorite cause as well with this credit management app. Our app is able to integrate seamlessly with your specific financial institution. This cross-credit management mobile application is able to pull all information you need together to make the best decisions as you budget the money spent from your various accounts. Please download The Good Steward Financial System onto your iPhone or Android device. Your fico score does not have to be uncontrollable. You can plan and improve your score with the help of this tool.