2008 Industry News
In the current credit crunch that we are in banks and financial institutions are scrutinizing borrowers credit histories much more closely. In essence credit scores have become more important than ever. Most borrowers do not know or understand their credit score. Unless you are a seeker of credit it is not something you think about.
There are basically three national reporting bureaus including Equifax, Experian, and TransUnion that do all the reporting. Each bureau has their own scoring system but they typically used the same model. By law each consumer is entitled to a free credit report annually. Scores range from 300 to 850 and of course the higher the better. There are several variables that comprise the total scoring. But a person’s payment history is the most important. Late payments, bankruptcy, public record are all part of the scoring process, being late once with a good story is excusable, but a history of frequent delinquency will negatively affect your score. The other important factor is how recently have the late payments occurred and the number of credit cards involved. The cost of loans, insurance premiums and other interest fees are directly influenced by low credit scores.
Credit cards should be used cautiously and prudently. Also just the number of credit card balances could negatively impact your credit score. Cardholders should exercise care that their card balances do not exceed 25% to 30% of the available credit. Cardholders should limit the number of cards they use and access cash only as a last resort.
As for credit scores the most desirable range for the individual credit score would be in the mid 700's. At this level you would not be expected to pay any premiums for a typical credit transaction. However as scores decline cardholders can be expected to pay a premium for credit.
Credit reports are available free of charge by visiting www.annualcreditreport.com
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