A credit score is a number that helps lenders predict how likely you are to make your payments on time. This score affects your ability to obtain credit and helps determine what you pay for credit cards, auto loans, and mortgages on Jersey Shore real estate. Even your insurance rate is related to your score. The higher your score, often referred to as a FICO score, the more apt you are to be approved for and pay a lower interest rate on new loans.
What do the numbers mean?
FICO scores range from 300 to 850, with most people scoring in the 600s and 700s, and are generally rated from excellent to very bad.
- Above 800 is considered excellent. This rating reflects that fact that you pay bills on time, have a strong credit history, and have not filed for bankruptcy. You use your credit responsibly.
- Between 750 and 800 falls into the very good category. You are considered a very low risk because of your history of paying bills on time and acting responsibly.
- Between 700 and 750 puts you in the low risk range. You my have missed some payments in the past, but you current record is good. You do not have an excessive amount of credit card debt.
- Between 650 and 700, or fair, means you are a moderate risk. Your credit history may include older negative items, too many recent applications for new credit, or a higher than normal credit card debt.
- Between 600 and 650 is a bad score, and you are deemed a high risk for purchasing Jersey Shore real estate. Your score most likely reflects high credit card debt, late payments, collections, or bankruptcy, and you may well be turned down for new credit.
- Below 600 is considered very bad, and you are viewed as a very high credit risk. If you are approved at all, it will be at a much high interest rate–or you may even need a cosigner or a very large down payment in order to secure a loan.
Because you have not yet established a credit history due to lack of credit cards and/or loans, you may have no credit score. Opening a new credit card account and using it responsibly for a few months should alleviate this problem.
What makes up the credit score?
Your payment history comprises 35% of the score, with the amount of debt you have affects about 30%. 15% of the score is derived from the length of your credit history, with 10% resulting from recent new credit applications. Other factors such a s a variety of credit types make up the final 10%.
How can you improve your score?
- Use you credit cards to establish a positive and consistent pattern of payment.
- Check your credit report for inaccuracies. This is a common problem, so look for and report misinformation.
- Have a variety of debt. In addition to a mortgage on your Jersey Shore real estate, add auto loans and credit cards to the mix. It is important to demonstrate good money management in more than one area.