According to statistics, the average FICO credit score is currently 695, an all-time high in the United States. Although there are different scoring models, resulting in the fluctuation of this figure by a few points, the majority fall between 660 and 720. Roughly 14% of the population does not have any credit score – this is what is labeled as “credit invisible”. Because of this, these people will have problems obtaining new lines of credit. For lenders, a credit score can determine how much of a risk a potential barrower might be. Beyond simply approving someone for a loan, a credit score can determine how big a line of credit a person can get, and most importantly, how high the interest rate will be.
So how do credit scores break down?
Generally, a score above 720 is excellent; between 660-719 is considered average or fair; 620-659 poor, and anything below 620 is considered bad.
Tips for Improving Your Credit Score
To obtain the best mortgage interest rates, you will be required by most lenders to have a FICO score above 740, although anything below that doesn’t prevent a person from buying a home. It just means, as mentioned, you won’t be getting the best interest rate, so in the end a lower credit score will mean you will be paying more for that home than someone who has a higher score, and thus a lower interest rate.
There are a number of things that can prevent you from getting a better credit score. If you want to quickly improve your credit score, there are 5 steps you should focus on.
- Check your credit score: There is a connection between your credit history and FICO score, but they are reported separately. 90% of lenders all over the United States use your FICO score. It is critical to know what your scores are and if necessary, you should get a professional for verification of accuracy. Get copies of your credit report. You can do this once a year for free at www.annualcreditreport.com. This is the only free and authorized source to get a free copy of your reports. Federal law allows you to get a free report from the three major national credit bureaus every 12 months. Take advantage of this; get copies every year. Study them and understand how your credit is being used.
- Lower your debt: This sounds like an obvious one, but the truth is that debt has an impact on many people as well as entrepreneurs who get deep in debt to pay whatever bills they have while working to make a successful venture. For a fresh perspective, you should consult a financial planner and as a way to clarify your situation. And you should make sure that you prioritize and develop a strategy for repayment. Beware! There are many honest agencies out there who claim they will help you improve your credit score, and just as many who will charge a fee that will in the end get you nowhere. There are ways to educate yourself; the Federal Trade Commission offers a free downloadable pamphlet, “Credit Repair: How to Help Yourself”.
- Savings: You are not alone if you do not have much in the way of savings. According to a recent survey by Bankrate.com, 63% of the people in the United States do not have the liquid funds to cover an emergency of $500. Keep in mind that you do not need to have a huge income to take the first step towards saving. You can help in building savings by cutting down and setting aside just a small amount from your monthly expenses. Also remember, it is vital to remember that when you apply for a loan, what you have saved up is taken into consideration. Make a budget that includes setting aside even a little bit every month. That way a $500 unexpected expense will be a minor annoyance, not a major emergency.
- Check your credit report on a regular basis: You printed out that free copy, right? Well don’t just shove it in a drawer, check it out line by line. There are often mistakes in credit histories, either from identity mismatches or erroneously reported data and increasingly identify theft. You should keep in ind that the credit bureaus have no idea of what is accurate – their job is to report what they receive. It is necessary to make sure that you check your history on a regular basis. This is an important step to improving your credit.
- Inform yourself: While entrepreneurs may know everything related to technology and their product, they may be unaware about credit. It is fundamental to keep in mind that financial knowledge is not intuitive, and without doing a little research or getting some help, no one has all the answers. You should get informed and make sure that you learn everything you can about credit, debt, and your personal financial situation as a whole.
As you can see, it is not that difficult to improve your credit. This is a crucial aspect of your life and plays a serious role in it. With a few simple tips like those mentioned above, you can make your credit a lot better and make things a little easier when you need a new line of credit.
You can also sign up for a credit counseling course to understand more about credit, debit, and bankruptcy. Last but not least, do not hesitate to call a professional to help you with any problems or advice that you might need – this is the smartest move you can make when it comes to improving your credit and making sure that you have the necessary savings for a rainy day.
Filing For Bankruptcy In Florida
If all else fails, bankruptcy can be an option. It is a clean start, and a way to start over. It’s not something to be feared, instead it’s another tool that can help get you on the road to financial freedom.
If you need professional help with your personal finances and bankruptcy, you should immediately contact an experienced bankruptcy attorney from the Badgley Law Group. We have a team of highly trained bankruptcy lawyers who can provide the services you need to file for bankruptcy and help you make a fresh start.
We understand that each case is unique and careful assessment is required before an appropriate course of action can be chosen. If you need to file for bankruptcy, or any other services that involve your finances in Florida, contact us at 407-781-0420, for a free consultation.