What is a good credit score? The booster saves you thousands


Tracking, repairing, and increasing your credit score can be tedious, but in the long run, it can save you tens of thousands of dollars.


Think of it like researching and choosing a winning S&P 500 stock. A better credit rating pays big dividends and compounding gains over time.

To keep your credit healthy, you’ll need to manage it like you manage the rest of your portfolio. Check it regularly and follow solid advice, like our expert advice.

“Consumers should watch their credit reports very closely and question anything that doesn’t make sense,” said Jim Kemish, president of Sky Blue Credit, a credit repair service in Boca Raton, Fla. .

“If you’re about to make a major purchase, check your score three months in advance, fix mistakes, and pay off debt to boost your credit score,” said Carolyn Warren, author of “Repair Your Credit Like the Pros “. “She is a former mortgage broker and a former credit repair specialist.

What is a good credit score?

Most lenders use what are called FICO scores to assess an individual’s credit. Most FICO scores fall between 300 and 850. The higher the better. What should you aim for in a FICO score? Warren says 740 is an “excellent” credit score. And she says that’s the minimum that conventional mortgage lenders look for to get you a good rate.

Here are the five factors Experian dit are used in creating your credit score, and how much each counts:

  • Payment history: 35%
  • Amounts due: 30%
  • Length of credit history: 15%
  • Credit mix: 10%
  • New credit: 10%

Who rates your credit? Three credit reporting agencies, Equifax (EFX), Experian and Trans Union (TRU), transmit credit scores and consumer information to banks, insurers, credit card companies, employers and landlords. Just Isaac Corporation (FICO) created FICO, which is the method used by credit reporting agencies to create your credit score.

Other credit services, such as FreeScoreOnline and Credit Karma, help customers collect agency scores and provide other services. Credit Karma only works with Experian and TransUnion. Some banks, like Wells Fargo (WFC), provide you with your credit score in their banking applications.

Boost your credit score, save thousands on a mortgage

Mortgage lenders can help you increase your credit score before locking in an interest rate. Kemish says to ask your mortgage broker or loan officer for a quick rescore.

Only lenders are allowed to request a quick rescore from a credit bureau. To apply, the buyer pays off their debt to boost their credit rating and the loan officer then submits documentation of the repayment to the credit bureau.

Credit bureaus sometimes complete a reassessment for a lender in just 48 hours, although it can take up to five days.

“Any good mortgage broker should offer this opportunity to their clients,” Kemish said.

How much is a rescore worth – $68,000 or potentially much more. Use a mortgage calculator to estimate payments at various interest rates.

For a modest mortgage of $300,000, at a fixed rate of 5% for 30 years, your payment would be $1,610 per month. At 6%, you would pay $1,799 per month. Your reduction per month is $189 and over a year it is $2,268. Over the 30-year life of the loan, that’s $68,000, which could fund your child’s college education or boost your retirement.

“That 1% change in your mortgage rate could be accomplished with a 50 point change in your credit score, which could just mean paying off a credit card,” Kemish said.

Track your credit score

Kemish says you should check your credit every month. “If there’s a change, you want to know why,” he said. And he recommends consumers use credit monitoring services. IdentityWorks and Experian’s myFICO are two examples, but there are many more.

“Collections is very lax in updating credit bureaus in a timely manner and Collections should be questioned by consumers,” Kemish said.

He sometimes says he can fix a customer’s credit simply by “fixing duplicates”. This is when two or more collection agencies report to the credit bureaus on the same debt collection.

“If there are duplicates and we remove them, you could see a 50 point increase in a credit score,” Kemish said.

Last week, credit score errors caught the eye. Equifax revealed that a coding issue caused it to send inaccurate credit reports to lenders between March 17 and April 6. The company has now been named in a class action lawsuit.

Equifax said the error caused scores to be reduced by “25 points or more” for about 300,000 consumers. Consumers who believe their loan decision may have been affected should contact their lender.

But Warren says it’s the lenders who should be reaching out. “Lenders should review all customers who applied for loans on those dates, see if their customers got the rates they deserved, and make sure they’re right for them,” Warren said.

Don’t throw a credit card and close it

Several factors in credit card usage impact your score. First, and most obvious, don’t miss a payment or make a late payment. Second, do not use the full amount of credit offered to you. Kemish says to keep your usage below 80%; Warren recommends less than 50% or even as little as 30%.

“I had a client who was never behind on his credit card, but he had a lower than normal credit score because he had high balances all the time,” Warren said. Sometimes this happens because people use up their limit for business trips.

Warren says to use two cards and keep balances low, so your available credit is high and your usage is low. It also says to use your secondary card enough to keep it open. Inactive cards can be closed, which will lower your credit score.

Veterinary Credit Repair Services

Should you get help to repair your credit? Yes, but choose a credit repair service wisely.

Warren says to find one with at least five years of experience. Make sure the service discloses all charges and outlines cancellation rights and procedures.

“If you have a really great credit repair service, they’re worth every penny,” she said. “They can do a better job than you, and do it faster and more efficiently.”

Kemish recommends checking out a service with the Better Business Bureau. He says to call three different services and ask them. If they try to sell you before assessing your needs, that’s a bad sign.

“You want to do business with a company that puts you first,” Kemish said.

Follow Kathleen Doler on Twitter @kathleendoler


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