subject: Tips for Getting Your Credit Report [print this page] Tips for Getting Your Credit Report Tips for Getting Your Credit Report
The FICO score is a number between 300 and 800 that gives a lender an idea of your ability to pay back a loan. Most lenders agree that a score higher than 600 is considered "good" and that they are able to work with this type of score in order to secure a loan for you through their underwriters. If your score falls between 620 and 660, you will probably have to write more explanation letters and work harder for a loan since most scores in this range may have past issues or some kind of history problem. You also might be looking at a higher interest rate on the loan since lenders usually charge higher interest rates for loans that they consider more risky.
Your FICO credit score is influenced by five determining factors that help lenders decide your credit risk to them. Each of the following is taken into account when putting together a credit score for you, in descending order of importance to your lender:
Past Delinquencies. If you have made late payments in the past (say two years or sometimes longer ago than this), you are more likely to repeat this behavior in the future, and you are more of a risk to the lender because of these past incidences.
Use of Credit. If you max out your credit cards or keep them close to their limit, then you are considered a riskier applicant because of these excessive spending habits, according to your lender.
Credit File Length. If you have a short credit history, the FICO system assumes you are more of a risk to them because you are inexperienced with handling credit and paying your bills on time.
Number Of Times Asked For Credit. If you initiated multiple requests for credit cards, loans, or other debt products in a short period of time, you are more of a risk because this may indicate a financial problem with you.
Mix of Credit. If you only have credit cards (revolving credit loans), you are considered a riskier applicant than someone who has a combination of installment (for example, car loans) and revolving loans, since extensive use of credit cards may indicate some type of income problem for you. On an installment loan, money is borrowed once and fixed payments are made until the balance is paid out in full. Revolving credit has borrowers making regular payments, which frees up the access to more money but also has an ever increasing amount of interest accrued.
The credit score system also looks for patterns and whether or not any problems appear to be ongoing and, therefore, discouraging for another loan arrangement to be added. If your score falls below 620, you have a chance of getting a loan, but you will really have to work for it and the interest rate paid will be much higher than for those applicants with higher credit scores. In recent years, more of these subprime-type loans have been granted, and certain lenders specialize in dealing with individuals who have this type credit rating.
