A good credit rating is more essential than ever. In the aftermath of the financial crisis, lenders have raised their standards for credit scores. Raising their credit score is the only way many people can be able to secure a loan today, let alone a loan with an affordable rate. Achieving a higher credit rating gets lower rates of interest.A poorly maintained credit rating makes borrowing money costly. Fico scores in the 650 range are problematic. A FICO credit rating of 750 is considered good to great. A rare breed of consumers work at it to pass the 800 mark. An Arkansas man is a case in point. He dedicates his life toward the goal of building his Fico score to eight hundred fifty. The payoff for his dedication could possibly be a retirement free of financial worry.
The 850 Fico score is a big bargain
A FICO credit score of eight hundred fifty has been achieved by .5 percent of Americans, according to Fico. To illustrate the discipline required, CNN profiled Chris Plepinski of Rogers, Ark as he closed in on his goal of an 850 FICO score. Plepinski is currently at 813, putting him ahead of more than 82 percent of his fellow Americans. His burly credit score will conserve him masses over his lifetime. But he’s not satisfied. Plepinski told CNN that a Fico score of 850 is the only acceptable outcome. To do that he studies every factor of a Fico rating in detail. He checks his FICO score every 90 days and adjusts his personal finances to squeeze out each achievable point. A couple of years ago he added an auto loans to his credit mix, rather than paying money, which he could have, as a tactic to increase is Fico score.
Fico credit scores and how to boost these
A FICO credit rating is distilled from credit score data collected by the Equifax, Experian and TransUnion credit bureaus. Bankrate.com reports that FICO scores range from lows of 300 to 400 to highs of 800 and higher. 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 accessible credit – 10 percent Recent new credit – 10 percent Using these factors as a guide, timely payments, reconciling overlooked payments, reducing balances on revolving credit (credit cards), paying down rather than transferring balances, staying away from new debt and keeping existing charge cards nominally active are helpful for raising credit scores.
The long-term benefits of higher credit scores
The opportunity to save masses could be lost, Liz Pulliam Weston at MSN Money says, because of a mediocre credit score. One person muddling through at 650 was contrasted with a more organized individual who enjoyed a 750 score. She calculated the difference each person paid in interest on various loans, including student loans, charge cards, auto loans for people with bad credit, mortgages and home equity loans. Fast forward 50 years and the lower credit score got hit with $201,712 more in interest payments. Weston divided $201,712 over 50 years and figured an 8 percent average return. In interest saved, the higher credit score could allow a retirement account to grow to more than $2.3 million.
Additional reading
CNN
money.cnn.com
Bankrate
bankrate.com
MSN Money Central
moneycentral.msn.com
