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Bad_Credit___Understanding_The_Basics

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									Title:
Bad Credit : Understanding The Basics


Word Count:
598


Summary:
Many people have heard of bad credit, but some may not know what it means. For a long time, there was no
established method for determining the credit activities of consumers. However, this all changed when a
company called the Fair Isaac Corporation designed a credit scoring system that is called the FICO score.



Keywords:
credit, cards, bad, poor, adverse, fico, score, rating, check, history, build, improve



Article Body:
Many people have heard of bad credit, but some may not know what it means. For a long time, there was no
established method for determining the credit activities of consumers. However, this all changed when a
company called the Fair Isaac Corporation designed a credit scoring system that is called the FICO score.
Because the three major credit agencies have different information on each consumer, the FICO score
calculated by these agencies won't be exact.


Your FICO score has become the best way to determine if your credit is good or bad. To get your store,
information in your credit report is compared to the credit reports of others. Your future credit activities can
be determined by this information. When you apply for a loan, lenders will look at the FICO score to
determine if they should allow you to borrow money. Having a low score doesn't automatically mean you
won't be allowed to get a loan.


In the past, having any marks on your credit report would cause lenders not to loan you any money. They
had no way of determining which borrowers would pay off their debts. With the advent of the FICO score,
more people today who have had problems with their credit in the past are now able to apply for loans.
Mathematical models allow lenders to study the behavior of borrowers to decide whom they should lend
money to. Banks and credit cards companies have taken advantage of this data by making offers to people
who have different credit issues.


Those who have problems with their credit can usually apply for loans, but they can expect to have much
higher interest rates. The FICO score ranges from about 300 to 850. The closer you are to 850, the better
your score is. Statistics show that the average American has a credit score that is about 677. To qualify for
loans that have the best interest rates and features, you will need to have a score that is at least 720. If you
want to know your credit score, there are a number of services that will charge you a fee for it.
A number of factors go into calculating your score. The most important factor is your payment history. How
you make your payments will determine about 35% of your score, which is almost half. Failing to make
payments on time is one of the leading causes of getting bad credit. Your payment history includes
payments on credit cards, loans, and other bills. Filing for bankruptcy can greatly lower your score.


The amount of money you owe will determine you score as well. People who have too many loans and
credit cards will have a score that is lower. If you have a long credit history that is good, this will increase
your score. Lenders are much more likely to give good loans to people who have established credit. It is
important to understand the different things that affect your credit score, because this could allow you to
maintain a high score.


If your credit score is low, this means that you need to start making payments on time. If you have a large
number of loans and credit cards, get rid of some of them. Being responsible with how you manage your
credit will allow you to keep a high credit score. Lenders will be much more likely to give you the best rates
and features on loans. Even if one lender rejects you, this doesn't mean that all lenders will reject you.
Understanding credit and how to manage it will allow you to remain financially successful.




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