If you want to improve your credit score, the first thing you need to know is what it is. Once you know your number you will have an idea of how far you have to go to achieve a great credit score. The better your credit is the lower interest credit you will qualify for when the time comes to seek credit.
Creditors call your credit score a “Beacon Score”. If you request your credit report online, it will reference your credit score as a “Fico Score” – these are the same numbers.
The credit score ranges from R all the way up to 900. An “R” credit score stands for “Reject” and appears immediately after someone files for bankruptcy. It does not become a number until the individual has been discharged from bankruptcy. 900 represents the best possible credit score. The majority of individuals have a credit score in the 700’s.
You need a minimum credit score of 680 to qualify for a mortgage with a major bank. If your credit score is between 600-679, you don’t have bad credit yet but you better make some improvements. If your credit score is below 600, most financial institutions will consider you to have bad credit.
So what goes into to a strong credit score? You just wouldn’t believe how seemingly simple things can reduce your credit score and they have nothing to do with making late payments. Here are the top 5:
1. Too much debt – this will reduce your credit score
2. Inquiries – the number of times you apply for credit in a single calendar year impacts your credit score. The rule of thumb is not to exceed 4 applications for credit in a single calendar year. Remember, when opening an account or applying for utilities or insurance, if you are asked for permission to pull your credit, it will count as an inquiry.
3. Too many new accounts – when you obtain a number of credit cards at the same time it will reduce your credit score.
4. Too many accounts altogether – even if you don’t owe money to all of them, too many credit products will reduce your credit score.
5. Credit balances too high in proportion to credit limit. Even if you pay your credit card in full each month, never run a balance that is more than 75% of your credit limit. This will reduce your credit score.
Your credit score is one component of your overall financial health. A relationship with a good financial advisor will help you not only work towards an excellent credit score but will also help you get your financial profile strong enough to qualify for the lowest interest rates. For more information about your credit score and how to qualify for the lowest interest rates please visit http://www.debtcare.ca/