How high should my credit score be?

How high should my credit score be?

How high should my credit score be?

Here are some general rules for your consideration. Your minimum credit score must be at least 650. If your credit score is below 650, there are ways to fix it. Here’s how it works…

A. You can dispute anything on your credit report. If the merchant cannot provide proof of their claim, then the item should be removed from your credit report. For example, if Department Store X says you didn’t pay off your $72 balance on your X card in 1997, and you say you did, then Department Store X has 30 days to provide documentation proving that that the bill has not been paid. If they can’t prove their claim, then the outstanding debt is removed and you move to a higher credit score. If Department Store X is right and you do owe them $72, then you now know the problem and have the option to pay the $72…again moving towards a higher credit score.

B. Get and review copies of your three main credit reports every year – more often if you’re approaching key times when your credit score is especially important.

° С. Between reports from the Federal Trade Commission (“FTC”) and CBS News, it is estimated that anywhere between five and eighty percent of credit reports contain errors. Some mistakes are actually good for you and some are not so good. In my mid-twenties, I checked my credit reports and was overjoyed to learn that not only had I bought a new car, but I had paid it off with a perfect payment history. It was great for my young credit history – I never found the car.

D. Your credit score has five components. Here are the five components and their degree of importance in percentages:

  1. Payment history (35%) – Here, credit bureaus (CBs) look at mortgages, credit cards, installment loans, retail accounts, adverse public records such as bankruptcy, lawsuits, judgments, liens, liens, late payments… and so called If you have delinquent payments, CBs will look at (a) amount delinquent, (b) period delinquent, (c) number of accounts delinquent.
  2. Amounts Due (30%) – CBs look at the type of accounts you use and the amount of credit you use against your available credit. For example, all other things being equal, a person who has balances equal to 95% of available credit on ten personal credit cards for a total of $50,000 in outstanding debt will have a lower credit score than a person who has 50% balances on three credit cards for a total of $10,000 in outstanding debt.
  3. Length of Credit History (15%) – CBs look at specific types of accounts, how long the accounts have been open, and the level and timing of account activity. Surprisingly, for credit scoring purposes, it appears that having credit accounts with outstanding balances (within reason) is actually better than having no open accounts or no credit history. Debt relief can actually lower your credit score. I have a friend who is a very astute, very successful former international banker. He has done business in more than 20 countries and lived in nine countries. This is a person of extraordinary success, wealth and extremely responsible money management practices. He was turned down when he applied for a credit card at the same bank where he worked. Reason: No US credit history.
  4. New credit history (10%) – In short, CBs check if you have recently opened or tried to open many new accounts. As you can imagine, someone thinking of lending you money gets very nervous when they find out that you’re borrowing money from everyone.
  5. Type of credit used (10%) – CBs look at the balance of debt spread across different types of debt from credit cards to mortgages and secured to unsecured.

Your credit score is based on all of the items above. This is not a passing condition for each of the categories. Your score is obtained as an aggregate, and this score is constantly changing. One person’s outcome and financial profile will be different than another person’s. The information presented here is on the thick side of the Bell Curve, but provides solid guidance.

e. If you are focused on an acquisition (or other type of loan) and your score is below the 650 mark, keep in mind that a business partner’s score that is 700 or higher can help offset your score. When lenders consider a borrower’s qualifications, they look at the entire “borrower,” whether it’s one person or a legion of people.

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