- Posted October 5, 2013 by
This iReport is part of an assignment:
This is a business trip?!
Know your credit score today and be ready for tomorrow
Do you know your credit score? A good or bad credit score can influence what rate you are charged on car loans, mortgages and credit cards. Do you know your credit score? A good or bad credit score can influence what rate you are charged on car loans, mortgages and credit cards. We’ve all seen the ads telling us to check our credit scores. Most of these ads are American, but that doesn’t mean Canadians shouldn’t heed the advice.
A good credit rating will make it easier to get a mortgage or a line of credit. Telecom companies may check your rating before they give you a phone, as will other businesses that want to know if you have good credit before they enter into an agreement with you. Your credit rating is determined by five factors: payment history, outstanding debt, credit account history, recent inquiries and types of credit. Payment history simply tracks whether you make your payments on time. If you’re late paying your bills, your rating could take a hit. Having too much debt is another thing lenders look for. Lenders want to know whether your outstanding debt—credit cards, mortgages, lines of credit, etc.—exceeds your ability to pay it off. Credit history looks at how you’ve paid off loans in the past. You’ll get a better score if you’ve been using, and paying off, the same credit card for 10 years versus one you’ve had for only a few months. Lastly, lenders want to know what type of credit you have. They want to see that you can handle more forms of credit than a simple credit card will give you. Having a mortgage, a car loan and a line of credit, in addition to a credit card, will help your rating.
What’s the right score?
A perfect credit score is 900, but the average score for Canadians is around 700. Anything under 620 could affect your ability to secure a loan. If you do have a low score it doesn’t mean you’ll never be able to borrow again. Some places will lend you money, albeit at higher interest rates. You can also work on improving your score, too , but don’t expect improvements overnight. Schwartz says that it could take between six months to a couple of years of hard work before your score really improves. His advice is focus on paying your bills on time and keeping your overall balances below 50% of your total available credit. The score range provided here does not guarantee credit approval nor rejection by any financial institution. but many people are using services to calculate their credit score. In this article i want to show you sample how to calculate your credit score, this is general approach for calculation of your credit score.
In fact: Each credit agency has its own scoring system. For better understanding of credit score calculation i want to present the following questions that will calculate our credit score:
Questions for credit score calculation:
1) How many total accounts do you have? (Accounts include credit cards, retail cards, auto loans, mortgage loans, student loans, etc.
2) How many of your accounts:
A) Are presently 30 days late?
B) Were previously 30 days late?
C) Are presently 60 days late or greater?
D) Were previously 60 days late or greater?
3) How many credit cards or loans have you applied for in the last 2 years?
4) Excluding your mortgage, how many open installment loans do you have? (Installment loans are loans which have a fixed monthly payment amount over a scheduled period of time. Auto loans and student loans are examples of installment loans.)
5) How many open credit cards do you have?
6) What is the total credit limit on all of your open credit cards? (For example, if you have a VISA with a limit of $20,000 and a retail charge card with a limit of $1000, Your total credit limit on your credit card accounts would be: $21,000 ($20,000 + $1,000).
7) What is the total balance on all of your open credit cards? (For example, if you have a VISA with a balance of $4,000 and a retail charge card with a balance of $500, your total balances your credit card accounts would be: $4,500 ($4,000 + $500).
8) What is the number of open credit cards that are "maxed out"? ((less than 10% of credit limit is available) As an example, if you have a VISA with a balance of $4,000 and a limit of $5,000 (20% of credit limit available) and a retail charge card with a balance of $950 and a limit of $1000 (5% credit limit available), one credit card (the retail charge card) would be considered "maxed out" since less than 10% of the credit limit is available.
9) If you have had a judgment, tax lien, or bankruptcy occur, when was the most recent occurrence? (If you have had multiple judgments, tax liens, or bankruptcies, only use the most recent occurrence to answer this question. For example, if you filed for bankruptcy 5 years ago, but also had a judgment occur 18 months ago, your most recent occurrence would be: 12-24 months ago)
10) When was your most recent credit card or loan opened? (If you have opened multiple accounts recently, choose the most recent one).
Chief Executive Officer
I.B. Capital Management