Having a good credit rating means a lot more than it used to. Thanks to the credit crisis, credit scores need to be higher to get results. Rising a credit score is necessary now to get a personal loan and get a good rate of interest on that loan. A good credit score saves money.A poorly maintained credit rating makes borrowing money expensive. Fico ratings in the 650 range are problematic. When a Fico rating enters 750 territories, that’s quite darn good. A rare breed of consumers work at it to pass the 800 mark. A man living in Arkansas aspiring to a Fico rating of 850 is a textbook example of what it takes. His diligence could translate into a rich retirement.
What an 850 Fico rating means
A scant one-half of one percent of people in the United States have hit the 850 mark, Fico says. To illustrate the discipline required, CNN profiled Chris Plepinski of Rogers, Ark as he closed in on his goal of an 850 FICO score. Currently, Plepinski’s score is 813. His FICO score is higher than upwards of 82 percent of the rest of us. His burly credit score will conserve him masses over his lifetime. But he’s not satisfied. Plepinski told CNN that a Fico score of eight hundred fifty is the only acceptable outcome. To get there, Peplinski scrutinizes all the aspects Fico uses to determine credit scores. On a quarterly basis he re-evaluates his Fico position. To get as numerous points possible, Plepinski tweaks his financial behavior accordingly. A few years ago he added an auto loan to his credit mix, instead of paying money, which he could have, as a tactic to increase is Fico score.
The details regarding raising a credit score
Data on credit activity from Equifax, Experian and TransUnion is collected by Fico to produce credit ratings. Bankrate.com reports that FICO scores range from lows of 300 to 400 to highs of 800 and higher. The formula isn’t really overly complex. The final number is reached by calculating the credit aspects listed below:
Payment history – 35 percent
Total debt load – 30 percent
Length of established credit – 15 percent
Types of available credit – 10 percent
Recent new credit – 10 percent
Based on the above, tips for raising credit scores include always paying on time, making up missed payments, maintaining low credit card balances, paying off debt instead of transferring it, not applying for new loans or charge cards and not closing existing charge card accounts.
The long benefits of greater credit scores
A less than stellar credit score, as outlined by Liz Pulliam Weston at MSN Money, can put the hurt on a person’s finances over time. Weston penciled out a comparison between two people over 50 years. She ran a comparison based on the rates of interest each person could expect for many of life’s financial milestones. The transactions involved student loans, automobile loans, credit card offers, a mortgage and home equity borrowing. Fast forward 50 years and the lower credit score got hit with $201,712 more in interest payments. For emphasis, Weston went further. She split $201,712 into 50 years and factored an 8 percent return on that money. The person with the 750 FICO score could invest the interest saved and possibly accumulate a retirement account of $2.3 million.
Discover more information on this subject
CNN
money.cnn.com
Bankrate
bankrate.com
MSN Money Central
moneycentral.msn.com
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