Monday, March 3, 2008
What's A Good Credit Score
Before we jump right in and answer the question "What's A Good Credit Score", let cover off the basic of what a Credit Score actually is.
A credit score is a judgment about your financial health at a specific point in time. The credit score is derived from a credit report which is a histories of everything you are doing with your credit now, and everything you have done in the past. The credit bureaus ( such as Trans Union, Experian, or Equifax) collect this information, list it on your credit report, and then sell it to credit grantors who wish to see your credit history before they decide to lend you money.
Essentially, A credit score is a measure of risk you represent for lenders, compared with other consumers.
What factors affect your credit score?
Previous credit performance or payment history,current level of indebtedness or amount owed,amount of time credit has been in use (Length of Credit), pursuit of new credit and types of credit experience.
So to answer the question "What's A Good Credit Score" is:
You are considered a "prime borrower", if your credit score is above 680. You will have no problems getting a good interest rate on your home loan, car loan, or credit card. The higher your score, the more favorably lenders look upon you as a limited credit risk thus help you save money in the long run.
With a credit score under 680,you are "sub prime", and will likely pay a much higher interest rate yours loans and credit cards.
With a credit score falling below 560 most lenders and credit issuers perceive you as a very High RISK, This is no place for an individual to be.You will still be able to get a credit card but the likelihood of you being charged security deposit or high acquisition fee is quite high. In addition to that your interest rate will likely be 22 to 27%. Most home loans and the majority of new car loans will be unreachable with a score below 560.With the score below 560, you will pay significantly more for interest on loans plus pay unnecessary fees. A low credit score may also deny you from getting a job with many companies.
So to recap, what's a good credit score? 680 and above are considered "prime borrower" anything less will cost you more money in interest costs.
Would you like to learn about improving your credit score by repairing your credit report which will put money back into your hands and out of the creditors pockets?
Credit Squeeze On Credit Cards
Banks and other credit card providers are starting to review thousands of customers' credit limits and increasing the number of new applications that they turn down, as the fallout from the US lending crisis continues. By taking this action, lenders hope that they will cut the expensive costs of pursuing late payers and defaulters.
Major credit card provider Barclaycard, like most UK credit cards companies, has reduced the credit limits of half a million customers as it continues to review the spending patterns and behaviours of its customers. By taking such action, the company hopes to identify those most likely to be unable to repay their debt should the credit squeeze bite even further. In a two-pronged attack on the new credit problem, over half of the new applications to Barclaycard will ultimately be rejected, and at the same time existing customers are being closely monitored to ensure that they are not slipping into difficulties.
Barclaycard, however, insists that this is not a panic measure but an extension of policies introduced in 2006. A spokesman for Barclays said: "We have been carrying out an extensive review since 2006 and as a result have lowered the limits on credit cards for over 500,000 cardholders where we believe those customers have become overextended or where they have exceeded their agreed limit."
Even though the bank argues that their actions are merely good business practice, observers link it to falling profits; a 17% drop in the first half of their financial year. This is just the start of potential problems for Barclays as it's also seeking to off-load its consumer loan business First Plus for considerably less than the loan book worth of 4.5 billion, amidst growing concerns of rising bad debts. The bad news for the retail trade as Christmas approaches is that Barclays are not alone in taking this action. Most high street banks, credit card companies and other lenders are following suit.
From the consumer's point of view this is a definite change. The era in which credit card deals were abundant and easily available looks to be coming to an end. It will be even more vital to compare credit cards, the benefits they offer and the rates they charge before switching or even thinking of applying for a new card. Anyone thinking of applying for a new card that has a less than perfect credit record should think carefully, because if they are turned down for any new credit cards that application will leave an imprint on their credit record making it even more difficult for them to get credit in the future.
