Many people think that they only possess one credit score but this is simply not true. Various companies like banks and the big credit agencies use proprietary software to generate scores that are unique to their own particular needs. Despite their differences there are also a couple of things that all credit scores are based on. They always pull material from credit reports and they also assign a number to represent how they have rated your credit worth.

Once you get past those commonalities you will find that the differences will start mounting. Your credit score will certainly vary based on how each company rates your overall credit history and the importance they place on it. Financiers will frequently determine your risk using many of these different types of scores from companies like Experian, TransUnion, FICO, and VantageScore. You need to realize that the credit score you might think you have is not the only one assigned to you.

In order to help you wade through all of this credit score confusion there are things you should focus on to determine how strong your finances really are. There are 5 main credit scores that you need to watch with some frequency.

The FICO Score

This is the credit score that has been around the longest so it is used quite frequently by lenders. If you want to get a loan then there is a high probability that this score will be assessed by the lender. Fortunately there are easy ways for you to get a free copy of this report online.

The Vantage Score

This is one of the newer credit scores available to consumers and it is actually based on a partnership between TransUnion, Experian, and Equifax. The “Big Three” as they are known decided on this venture in an effort to provide consumers with an alternative to FICO. It gives people that have little prior credit the chance to obtain a credit score and purports to be more accurate than other scores out there. Eventually it might overtake FICO’s place as the king of credit scores.

The Credit Karma Score

This particular credit score is generated based on information gathered about you by TransUnion. The Credit Karma service actually watches for changes to your credit report and lets you know whenever something causes your score to change. It provides you with a number that will let you know how your credit is doing and it can be checked each day. Most people are usually fine with just a monthly peek. This is a great service for individuals that want a broad view of their credit well-being all in one handy location yet still have the ability to see changes as they happen.

The Credit Standard

This standard can help you determine just how good your credit score is and therefore help you get an idea of your likelihood of getting approved for loans at great rates. Currently a score of 720 is considered pretty decent but you will need a higher number in the neighborhood of 750 or more to get the best rates around. The current state of the economy has caused many lenders to be more stringent when considering who they decide to lend money to. As the economy mends itself with some help from new government regulations the credit standard will certainly fluctuate. You will have to monitor credit standards closely to be sure that you make the best financial decisions in the future.

The Insurance Score

This is the score that most people have never even heard of because it is only used by the insurance industry when pricing their premiums. It is based on credit and uses a combination of additional factors like how a person uses their credit, how much debt they have, and how often they made late payments. The insurance companies generate a score based on these factors and then use that number to determine how risky you are to insure. Their philosophy is that people with lower insurance scores are riskier and therefore should have to pay higher premiums for their insurance policies. That score has an enormous impact on how much your insurance will cost you.

The bottom line regarding credit scores is that you have to educate yourself on the many ways that your credit worthiness is being assessed. Since your credit has such a major impact on your ability to save money through better interest rates and an increased chance to obtain new credit, it needs to be understood. Once you take control of your credit you will be able to cash in on greater financial opportunities in the future.

Your FICO credit score impacts many of the decisions in your life. This magic 3 digit number affects the vehicle you can drive, what kinds of jobs you can have, where you can live and kids can go to school, and what kind of house you can buy. FICO scores come in ranges; with 300 reserved for those who use bankruptcy as a savings method, and 850 when the banks ask you to balance their budgets. Very few people ever achieve the upper echelon of perfect credit. MyFICO.com says that only 1% of the population has a FICO score of 850, while 13% are in the 800+ group. If your FICO is over 700 you are defined as having good credit.

What do the credit files of a person with a perfect FICO score look like? The FICO algorithm is a carefully guarded secret, however with enough information we can piece together the requirements to surpass an 800+ FICO score. FICO credits scores use five primary criteria to generate the number, which is detailed below.

We compared this information and information that we dug up on the Internet on what it takes to achieve a perfect score. Keeping all of this data in mind, let’s examine each of these factors and how they can help you get an amazing credit score.

History of Payments – 35%

Paying your bills on time is of the utmost importance. Most creditors don’t record a late payment until it surpasses 30 days, however there are always exceptions and even if you are only a few days past due, you could have a report filed with the credit bureau.

Generally, there are four late payment categories: 30, 60, 90 and 120+ days past due. These can follow your credit score for many years. You should always make an effort to pay at least the minimum payments each month.

• Perfect credit scores show no late payments in the last seven years, on average.
• For scores in the 800+ range, there will normally be no late payments within the last four years

Amounts Owing – 30%

Having access to debt doesn’t mean that you should use up all of your debt as fast as possible. A large portion of the FICO score is determined by the amount of money owing to your debtors, and that amount is compared to the total amount of credit available to you. It’s called ‘utilization’, and it’s a simple ration of your current debt to your credit limit. An example is a credit card with a $7500 balance and a $10,000 limit would have a utilization ratio of 75% (7500/10,000). Maxing out your credit cards would therefore lower your credit score. The best advice is to keep your utilization score at below 30%. The FICO algorithm takes into account the number of open accounts with outstanding balances, loan amounts still outstanding, and amounts owing on specific account types like revolving credit and loans that have installments.

• Perfect credit scorers usually have a utilization of under 10% for revolving type accounts like credit cards.
• Higher credit scores are found with installment loans when the borrower has paid down the original balance by at least 35%

Credit History – 15%

Wine gets better with age, and so does your credit score. Young professional have difficulty achieving an exceptionally high credit score mainly because they only recently have begun establishing a credit history and getting loans.

• Perfect FICO scorers on average opened their first accounts almost 20 years ago.
• 12 years, with 10 years of positive credit history was the average for people with scores over 800.

Fresh Credit – 10%

How many times have you been denied credit that you’ve applied for in the last 2 years? If your answer is quite a bit, then your FICO score is headed into a nosedive. Constantly applying for credit raises a red flag for lenders that you need the money quickly and are an investment risk. There are times however, like when trying to find the best credit card offer, that you would apply for multiple lines of credit.

• Perfect FICO credit scores keep inquiries to 2 every 2 years.
• Many people with perfect credit have not applied for more credit lines within the last 12 months.
• FICO credit scores take into account the various types of accounts that are open, and accounts with high credit have a demonstrated history of responsible credit use.

Credit Types – 10%

In a diversified investment portfolio, you typically see a mix of stocks, bonds, and mutual funds. This same idea can be used when thinking about your credit. Having an assortment of debt types can be seen as a responsible use of debt. Mortgages, Retail and Consumer Accounts, Credit Cards and Installment Loans are some of the types of credit accounts that a FICO score evaluates.

• Perfect credit scorers normally have at least six accounts paid as per the terms of their contracts.
• There is no limit to the number of open accounts someone can have, but too many will impact your credit score in the future.

Your score may not be where you want it to be yet, but don’t give up hope. Setting small term goals and checking your credit score often is the key to successful building. There are numerous free trial accounts that will give you your credit score without a fee. Two great sites for this are:

1. TrueCredit.com: This site provides a one week trial that reports on all three major credit agencies. After the trial, it is $14.95 per month.
2. GoFreeCredit.com: After the trial it is $19.95 per month, but the one week free trial also includes reporting from the 3 big credit bureaus.

Rebuilding Your Credit After Bankruptcy

Bankruptcy is one of the worst things you can do to your credit, and if you’re wondering how to rebuild credit after bankruptcy, then you’ve come to the right place. Bankruptcy appears on your credit report for 7 to 10 years. Sometimes though, bankruptcy is the only avenue you have to fix your finances, so in essence, you are damaging your credit it now, in order to save it in the future.

Nothing lasts forever however, and this also applies to your credit rating. Although bankruptcy is essentially a death sentence for your credit, with patience and a lot of perseverance, rebuilding credit after bankruptcy can start immediately.

Knowing that credit can be rebuilt can make you feel better, but your words need to be backed up by action. Your first step after filing bankruptcy is to ensure that the debts that got you into this mess in the first place are taken care of. In most cases, bankruptcy discharges only part of your debt, so you still have responsibility for your bills. Set up payment plans and ensure that you are saving enough money to make every single payment. When you have a history of good payments behind you, you can take the next step and start applying for credit. There are a few avenues to help raise your credit rating.

Monitor Your Reports

It’s very important to ensure that the credit reports that creditors use to summarize your financial responsibility and acumen, is 100% true and accurate, because there are times after a bankruptcy filing that some items are not reported properly. One of the common issues that appear on a credit report post bankruptcy is the accounts that were negotiated as part of the bankruptcy process not being recorded properly. These accounts continue to report as past due and your credit rating will not rise, it will continue to fall. Ensure every account that is applicable in bankruptcy is recorded properly. This helps current accounts with positive reporting history build your credit.

It’s easy to check your credit report. Your report is available for free at annualcreditreport.com. If you want to know the credit score, visit GoFreeCredit.com, which reports credit scores from the 3 largest credit agencies, and they offer a 7 day free trial. If necessary, write down the creditors contact information and contact them to have the bankruptcy details added to the account and credit record. Check on your credit report every 6 months after that to ensure there are no more errors.

Obtain a Secured Credit Card

After bankruptcy, getting an unsecured credit card will be next to impossible, so the next best thing is to seek a secured credit card. Reputable secured credit card providers will report payment histories to the 3 largest credit agencies. Some of the cards come with annual fees, but the benefits to your credit and the rebuilding process make it worth the cost. To set up a secured credit card, you will need a savings account to register with the card. The deposit amount in this account will determine the limit that is available on the secured card. Aside from the savings account aspect, the credit card has the exact same powers as an unsecured card. The difference is that if you become past due on your payment, the creditor withdraws the amount from the savings account, and your limit is lowered to the new balance until the money is restored to the savings account to increase it. There are dozens of secured credit cards but a few stand out:

At 14.99% to 19.99% APR the Orchard Bank Visa card has a first year fee of between $39 and $59, with the continuing fee for any years after that of $59. This card is actually unsecured, and is aimed at people with a poor credit score. The credit limit will increase the longer the account is in good standing, which will also increase your credit score.

The Public Savings Bank Open Sky Secured Visa comes with a very reasonable APR rate of 11%. There are no monthly or application fees, simply the $59 annual fee. This is a flexible, long term credit solution to help rebuild your credit. The only other cost is $25 each time you raise your credit limit.

Get an Installment Loan

Although a difficult path, obtaining an installment loan can help rebuild your credit, the tricky part comes into play when considering the past bankruptcy. The loan amount should only be used as an interest bearing account, even a CD so that the loan can be serviced on time. The interest that is paid on the loan is offset by the interest you earn on the CD, and the length of the loan and CD should be the same. Paying more than the minimum on the monthly payment will lower the total interest paid on the loan, and will reflect well on your credit history.

Interest rates on CD’s are currently on the low end, however the interest on the installment loan should also reflect a low interest rate. It is relatively easy to sign up for a CD, and you can visit banks like Discover Bank or Ally Bank, your long CD interest rate can be between 2 and 3 percent.

Anyone can take the steps to rebuild their credit after a bankruptcy, you just need to know what tools are available and where to find them. This article highlights a few tips on how to re-establish credit post bankruptcy. No one solution is the key to credit success, but combined over a 5 to 10 year period, and a solid payment history, your credit score and credit history will once again be normal.

how to rebuild credit after bankruptcy

With all the flack credit card companies have recently gotten over poor lending practices, interest rates, and poor financial management, these companies are more in need of your business now than ever. There is more competition, and a need for new cardholders within the industry, that you, the customer, can now benefit from this competition. The increase in competitiveness has led to an increased number of incentives for choosing to go with said credit company – from cash back incentives, low interest rates, airline mileage rewards, and more, companies are seeking customers wherever possible.

So regardless of credit score, it pays to do your homework when looking into getting a credit card. This will help to ensure that, not only do you get the best possible interest rate, but that you get the one that best rewards you for choosing to obtain your credit through said company. What follows are just a few examples of excellent cards for those with varying credit scores. If you are in the market for a new credit card, look into these, and the many other options out there to find the best possible card for you.

Best credit cards for those with excellent credit

It literally pays to have excellent credit, a widely known fact, and the case is still true when it comes to credit cards. Those with excellent credit will qualify for the lowest interest rates and the best rewards. Depending on your lifestyle, you can choose from incentives ranging from store rewards, cash back on purchases, airline and hotel points, exclusive offers, and low interest rates.

Chase Sapphire Preferred Card

This credit card is an excellent choice for those with very good credit who wish to reap rewards by way of airline miles. If you spend $3,000 in the first three months of having the card, you automatically receive 50,000 airline points towards two flights and hotel accommodations, which has a dollar value of around $625. This card also boasts a 7% annual points dividend, and you earn more rewards points by booking your flights and hotels through the companies rewards booking service.

American Express Preferred Rewards Gold Card

Those who prefer store rewards will love this card. When you spend $300 in the first three months of having this card, you get 10,000 Membership Rewards Points, which can be used at a wide number of retail, entertainment, and travel companies worldwide. With this card you also get exclusive access to events, and other deals or offers. There are many dining, entertainment, and travel rewards points awarded for using this card, and the theft protection is second-to-none.

Best credit cards for those with fair credit

Even if your credit is more “fair” than “excellent’, you can still qualify for a number of different cards that offer practical rewards that are highly beneficial to most card users.

Capital One No Hassle Rewards Credit Card

For those with fair credit who want to get the most out of their purchases, this Capital One card is a great option. With this card you get 2% cash back on grocery and gas purchases, and 1% cash back on all other purchases. If you shop at one of the 300+ approved retailers, you can also get up to 15% more cash back than when shopping at non-approved stores. These points do not expire and there is no limit to the number of points you can earn. Right now, Capital One is offering a 0% APR until April 2012.

First Premier Bank Classic Credit Card

This card is great for those who wish to use their credit card as an avenue to improving one’s credit score. There is a month long grace period, meaning that no interest is incurred on purchases that are paid off, in full, within 30 days of purchase. This makes for easy-to-manage credit, and in addition, your payment history is reported to the three major credit scoring agencies each month.

Best credit cards for those with poor credit

Those with poor credit are not left in the dark when it comes to getting a decent deal on a credit card. For those with poor credit, the main impetus for obtaining a credit card is to build, or rebuild one’s credit score.

Orchard Bank Classic Master Card

The interest rate on this card is variable, dependent on your credit score, but the range is within a reasonable limit. There is a low annual fee, making this card far more accessible to those with small budgets. One of the biggest advantages of this card is that your monthly payment history is reported to the three major credit scoring agencies, which speeds up the process of improving one’s credit score.

Applied Bank MasterCard or Visa

This is a secured credit card great for rebuilding credit. A secured line of credit is one in which a deposit must be made as collateral for the line of credit extended to you. These lines of credit tend to be small at first, increasing with successful payment history. This card boasts an incredibly low, 9.99$ interest rate, one of the lowest for all credit cards for those with poor credit. As with the credit card described above, Applied Bank reports your payments to the three major scoring agencies monthly.

Conclusion

Regardless of credit, there are a number of excellent credit card offers available in 2011. Whether you are looking to take advantage of your good credit, or rebuild your no-so-good credit, there are a whole bevy of excellent choices available to you. Take your time and do your homework and you will be rewarded with a card that rewards you for simply using it!

Credit cards have come a long way since the days of old and what you can do with them is a lot wider-reaching now that it has ever been. A cash advance credit card is one where you can obtain cash that is loaned to you based on your existing line of credit with your credit card company. This means that, if you need quick cash, you can take your credit card to an ATM and receive a certain amount of cash based on the total line of credit you were given by the issuer, less the amount you have already used for other purchases. For some, this is an excellent, easy way to obtain cash, with fewer penalties than a payday or other alternative form of loan, but there are a lot of fees and other consequences associated with getting a cash advance on your credit card that you need to fully understand the terms for your particular card before making the decision to use it to get quick cash.

The ins and outs of a credit card cash advance

A cash advance from your credit card can be a very valuable feature, especially when you need quick cash in the event of an emergency or other unexpected cost. If you have fair to excellent credit, the terms and fees associated with using the cash advance feature are often a lot more fair and easier to manage. The problem with the credit card cash advance comes when you are unable to pay off the cash advance quickly.

Cash advances are not free of fees and other costs. You are generally charged a base fee – a percentage of the advance you are taking – and the interest rate on a cash advance line of credit is often much higher than that of traditional credit purchases. When you take out a cash advance on your credit card, you are not often given a grace period as with other purchases, which means that interest on the cash advance begins to accrue as soon as the cash is in your hands. If you are going to use this feature, it is vital that you take into account all the fees and costs that will be associated with using this feature.

If you have the ability to quickly repay the cash advance, this is a nice alternative when you need cash fast for emergencies. However, this is not a way to make ends meet, as this is a fast track to financial disaster if you cannot repay the advances in a quick manner.

A word of warning about cash advance credit cards is that there are often stipulations in the cardholder agreement that require you to first pay off your low interest, traditional credit purchases before you can pay off the higher interest cash advance. This means that until you can pay off your balance on basic credit purchases, the total cost of your cash advance will continue to rise. This is a stipulation that not all credit card companies have, but it is recommended that you check over the fine print before using this feature. If this stipulation is in the fine print, it is recommended that you really consider your other options before using this feature, as this can quickly saddle you with a large, unexpected debt.

While this is an excellent feature if you have the money to quickly repay the cash advance, and can be very helpful in emergency situations where you need cash quick, it is advised that you make sure you understand the full cost of using your cash advance credit card before using it, so you do not find yourself in an untenable financial situation. For those with fair to excellent credit, the terms of a cash advance are usually a lot more workable. Those with poor credit are likely to get hit with an inordinate amount of fees, making it difficult for them to repay the cash advance before the debt balloons out of control. This can be a great feature, so long as you understand the full cost of using it. As with all types of credit lines, it is recommended that you read the fine print and carefully consider your options before making a move.

For too many of us, our credit score seems like this very foreign concept that, unless we are accountant, that we shouldn’t hope to understand. However, this couldn’t be farther from the truth. While initially, an understanding of credit and a credit score are a bit hard to grasp, they are vital pieces of information in today’s modern world, and with just a little bit of education, the “credit world” is quickly demystified.

Good credit often means a good credit score. A good credit score is one that shows lenders that you have a consistent history of paying your bills on time, that you have been extended lines of credit and have been able to repay them to the terms of the agreement, and, in short, that you are a good candidate for the extension of lines of credit. A good credit score tells lenders that they are likely to recoup the credit they extend to you.

 

How do you get a good credit score, and give me a number!

A good credit score is obtained slowly, over time. A long standing history of paying your bills on time is an excellent start. One also needs to be extended ever-growing lines of credit to show creditors that you are capable of being lent money and repaying your lines of credit. Many start by getting a small balance credit card or taking out a small loan, such as a used car loan. Repaying these small loans or lines of credit to the terms laid out in the agreement will help to boost your credit score. Having a variety of different types of credit – such as loans, credit cards, etc. – also helps to improve your credit score.

For most Americans, one’s credit score is somewhere between 600-800. This is, on average, somewhere between Fair and Good. There are two main scores that are used when determining credit score. One is the Vantage Score, the other is the classic FICO score. A good Vantage Score is anywhere in the range of 801-900 or a FICO score between 700-719. Having a credit score that is rated “good” or higher, will give you more leverage to obtain loans and lines of credit, as well as to get those lines of credit at more palatable interest rates.

What if I have a bad credit score?

If one has a bad credit score, that does not mean all hope is lost for them. It is helpful to have patience when trying to rebuild your credit. Just as it wasn’t ruined overnight, it won’t be fixed in a single day. The first thing to do when trying to rebuild your credit is to pay off any outstanding debts. This means outstanding bills, loans, credit card bills, and collections debts. You can often call these creditors and get favorable payment terms to get these debts paid off faster.

Once you have your debts paid off, you will need to have a decent period of time where you consistently pay your bills and other commitments, in full, and on time. Then you will need to start to re-establish a line of credit. This often entails doing the things one does to initially get their start building their credit history. Start with small lines of credit, pay them exactly to the terms of the agreement, and keep the accounts open. The longer you have positive, active lines of credit open, the better. As you can manage your money better, your score will start to improve and you will be able to obtain greater lines of credit, and thus improve your score further.

The benefit of having a good credit score are that there are more opportunities open to you by way of lines of credit. You are not only more likely to qualify for a loan or line of credit to begin with, but the better your credit score, the more favorable will be the terms of your loan. This means a lower interest rate and thus a lower overall cost of the things we need lines of credit for. Even if you have poor credit, there are steps that can be made to improve it and turn your bad credit score into a good one, and to start reaping the benefits of having good credit.

For most of us, we do not come face to face with our credit score until we go to apply for a line of credit or a loan. However, this 3-digit number is vitally important to one’s financial livelihood. You credit score will determine not only whether you will get a loan or line of credit or not, as well as what percentage of interest you should expect to pay on said line of credit or loan. For most of us, credit, even if merely by way of a mortgage, is a vital part of our ability to live the American Dream, so a basic understanding of what a credit score is, what the credit score range is, and how it is calculated is invaluable information to have.

The Basics of a Credit Score

A basic rule of thumb is the higher your credit score, the “better”. When one has a high credit score, they are seen as a “lower risk” to lenders – in short, the lenders feel that they are more likely to recoup their loan from individuals with a higher credit score. This means that those with a good credit score are more likely to qualify for loans, credit cards, and other lines of credit. It also means that they are likely to get the most favorable interest rate on their lines of credit.

Good credit is obtained through consistent, positive financial transactions such as paying bills on time every month, and obtaining lines of credit and paying them to the terms of the agreement. These activities open the doors to other lines of credit that only those with higher credit scores are privy to.

On the flip side, collections debts, regularly being late or missing payments entirely, failure to repay loans or credit card debt, or simply not having any credit are all factors that will reduce your credit score. Having a poor credit score or insufficient credit will make getting lines of credit more difficult, if not impossible in certain instances; one is also more likely to be saddled with a high interest rate on any lines of credit they may qualify for.

What Exactly is a Credit Score, Who Calculates It and How?

Your credit score is a 3-digit number that basically indicates to lenders your overall ability to “make good” or repay a line of credit extended to you. Credit scores are calculated by three different agencies, and they each have their own methodology for calculating said score. The scores are based on a series of variables, given different weights, that are placed into an algorithm that creates the three digit credit score.

There are two main scores that are used to determine one’s credit score, and the way they are calculated and the credit score range for each is slightly different. Sometimes the classic FICO Score is used, other times, the newer Vantage Score is used. The three different agencies that calculate these scores are Equifax, Experian, and Trans Union.

An Explanation of the Variables and Weights Used to Calculate the Credit Score

What follows is the basic breakdown of the variables used to determine one’s credit score, as well as the weight that each variable has to the overall score.

• Payment History – 35%
• Total Owed – 30%
• Length of credit history – 15%
• New credit – 10%
• Types of credit – 10%

Here is a visual representation of the same data:

Your payment history includes the number of accounts you’ve had that were paid on time, to the terms of the agreement, the number of collections debts you have, and how many delinquent accounts, if any, that you may have. When it comes to delinquent accounts, they also take into account how many you have, how much you owe, and how long the accounts have been in delinquency.

What you owe is a breakdown of what types of credit you have, how much you owe, to whom, the number of accounts that you have on revolving credit, and the number of accounts you have with a zero balance on them.

The length of credit history refers to the amount of time that you have had a history of transactions that would be reported to the three credit scoring agencies. It also takes into account how long the accounts you keep are still active, and the time since the last activity on each account. The longer your history of positive credit transactions, the better your credit score will be.

New credit refers to the number of recently established accounts, the number of credit inquiries being made into your credit history, as well as activities that are meant to re-establish your credit after a period of poor activity.

The type of credit simply refers to just that, the type. This means mortgages, revolving credit accounts, and credit that requires installment payments are all looked at differently. One’s credit score tends to be better when one has a diversity of different types of credit.

Credit Score Ranges and “Good Credit”

The FICO Score runs the range of 300-850; the Vantage Score ranges between 501-990. Most of us fall in the range of 600-800 on the credit score spectrum.

If one has “poor credit” they will have a Vantage Score between 501-600 and a FICO Score of 560-619. To be considered to have “good credit” one will have a Vantage Score between 801-900 and a FICO Score of 700-719. If one is striving for the “best credit”, their Vantage Score will need to be between 901-990 and their FICO Score between 720-850.

Though it is a bit confusing, this is vital information to know and understand. When it comes to getting lines of credit, this is going to be the determining factor as to whether you get the credit or not, as well as what the terms of the line of credit will be. There are many ways to improve bad credit, it isn’t a “deal breaker”, but you have to understand why your score is bad, and what areas of your financial life you need to work on in order to adequately address the problems.