A good credit score is more essential than ever. Within the aftermath of the financial crisis, lenders have raised their standards for credit ratings. Increasing their credit rating is the only way many people could be able to secure a loan today, let alone a loan with an affordable rate. Achieving a higher credit rating gets lower interest rates.A poorly maintained credit rating makes borrowing money costly. Fico scores in the 650 range are problematic. 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 incredibly organized Arkansas man is getting close to reaching his goal of an 850 Fico score. The payoff for his dedication could possibly be a retirement free of financial worry.
Exactly what an eight hundred fifty Fico rating means
Reaching a credit rating of eight hundred fifty is rare. As outlined by Fico only .5 percent of people within the U.S. are in that range. A CNN profile of Chris Plepinski of Rogers, Ark., chronicles his quest to achieve that elusive number. Presently, Plepinski’s score is 813. His FICO score is higher than upwards of 82 percent of the rest of us. Over the course of his life, Plepinski’s unusually high score could save him hundreds of thousands of dollars. But CNN reports that Plepinski won’t be satisfied until he hits 850. To do that he studies every factor of a Fico score in detail. Each three months, he revisits his Fico status and tends to make adjustments to his credit and borrowing to get the best possible result. He once took out a car loan even though he could pay money, figuring that adding the variety to his credit mix could bump up his score.
Fico credit ratings and the way to improve them
Various data from credit bureaus is used by Fico to determine credit scores. The data comes from TransUnion, Experian and Equifax. 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 available credit – 10 percent
Recent new credit – 10 percent
Based on the above, tips for raising credit scores include always paying on time, making up missed payments, maintaining low charge card balances, paying down debt instead of transferring it, not applying for new loans or charge cards and not closing existing charge card accounts.
The actual long advantages of greater credit ratings
A less than stellar credit rating, as outlined by Liz Pulliam Weston at MSN Money, can put the hurt on a person’s finances over time. A woman maintaining a 750 credit rating was compared with another sitting at 650. She ran a comparison based on the interest rates each person could expect for many of life’s financial milestones. The transactions included student loans, car loans, credit card offers, a mortgage and home equity borrowing. Fast forward 50 years and also the lower credit score got hit with $201,712 more in interest payments. Assuming an 8 percent return, Weston factored $201,712 into 50 years. In interest saved, the higher credit score could allow a retirement account to grow to more than $2.3 million.
CNN
money.cnn.com
Bankrate
bankrate.com
MSN Money Central
moneycentral.msn.com
