A good credit score is more important than ever. Thanks to the credit crisis, credit scores need to be higher to get results. It’s getting hard to qualify for a loan, let alone a loan at a reasonable rate of interest these days. To do so, most people may have to improve their credit ratings. Achieving a higher credit rating gets lower interest rates.A bad credit rating costs money. A number around 650 is perceived as a lackluster Fico score. Numbers within the 750 range are looked upon as very respectable. A select few, with discipline and focus have credit scores higher than 800. An Arkansas man is a case in point. He dedicates his life toward the goal of building his Fico score to 850. A rich, soothing retirement could be the reward for his achievement.
Raising the credit score to 850
Reaching a credit score of eight hundred fifty is rare. According to Fico only .5 percent of individuals United States of America are in that range. Chris Plepinski of Rogers, Ark. was featured in a CNN article about his plan for joining that exclusive club. Currently, Plepinski’s score is 813. His FICO score is higher than upwards of 82 percent of the rest of us. Plepinski is destined to save a lot of money within the future, thanks to his stratospheric Fico score. But CNN reports that Plepinski won’t be satisfied until he hits eight hundred fifty. To do that he studies each and every factor of a Fico score in detail. Each and every 3 months, he revisits his Fico status and tends to make adjustments to his credit and borrowing to get the best possible result. To add variety to his credit mix, which can boost a score, he got a auto loan, although he could have paid cash.
Fico credit ratings and the way to raise these
Data on credit activity from Equifax, Experian and TransUnion is collected by Fico to produce credit ratings. As reported by Bankrate.com, the spread of FICO scores goes from the low 300s to 800 and above. The number is a result of the following:
Payment history – 35 percent
Total debt load – 30 percent
Length of established credit – 15 percent
Types of accessible credit – 10 percent
Recent new credit – 10 percent
Using these factors as a guide, timely payments, reconciling overlooked payments, reducing balances on revolving credit (credit cards), paying down rather than transferring balances, staying from new debt and keeping existing credit cards nominally active are helpful for raising credit scores.
How increasing the credit rating turns good
The opportunity to save a fortune might be lost, Liz Pulliam Weston at MSN Money says, because of a mediocre credit score. Weston projected some numbers for two young people for a period of 50 years. One has a credit score of 750 and also the other 650. Weston ran numbers on the disparity of interest each could expect on such transactions as student loans, auto loans for bad credit, charge cards, mortgage loans and home equity lines of credit. Half a century hence, a total of $201,712 in interest paid separated the two, with the high credit score coming out that much further ahead. Assuming an 8 percent return, Weston factored $201,712 into 50 years. The person with the 750 FICO score could invest the interest saved and possibly accumulate a retirement account of $2.3 million.
Additional reading
CNN
money.cnn.com
Bankrate
bankrate.com
MSN Money Central
moneycentral.msn.com
