Understanding Your Credit Score了解你的信用评分.docx

UnderstandingYourCreditScoreWhatdoesyourscoremean?Thisratingsystemisasnapshotoftheriskyoucurrentlyrepresenttoalender.Severalparametersinyourcreditfile,includinglengthofcredithistory,numberofopenaccounts,loans,mortgages,publicrecords,andothersareformulatedtoproduceathree-digitscorebetweenabout300and950.ThereareotherscoresusedbylendersandinsurancecompaniessuchasApplicationandBehaviorscores.Theseotherscorestakeotherinformationintoaccount.Usuallyalenderwilluseacombinationofyourcreditscorewithotherfactorswhendeterminingyourrisk.Theyallhavethesameobjective,todeterminethepotentialriskoftheborrower.Regardlessofhowthescorewasgenerated,theyallyieldanindustrystandardthree-digitscore.Thisscoreplacestheborrowerinoneofthreemaincategories.Prime,Sub-Prime,andCautiousPrimeIfyourcreditscoreisabove680,youareconsidereda"Primeborrower"andW川havenoproblemgettingagoodinterestrateonyourhomeloan,carloan,orcreditcard.Sub-PrimeIfyourcreditscoreisbelow680,youare"SubPrime*',andwilllikelypayamuchhigherinterestrateonyourloan.CaUtiOIISBelow560istheCautiousscore.Atleastthatishowmostlendersandcreditissuersperceiveit.Youcanstillgetacreditcardbutyouwilllikelybehitwithasecuritydepositorhighacquisitionfee.Inadditiontothatyourinterestratewilllikelybe22to23%.Youcanforgetaboutmosthomeloansandthemajorityofnewcarloansatthisscore.Below560isnoplacetobe.Youwillpaymuch,muchmoreinhigherinterestandunnecessaryfees.Youmayevenpaymoreforyourinsurancerates.Averylowscorecanevenpreventyoufromgettingajobwithmanycompanies.Howmuchdoesalowscorecostyou?CreditCardSMostifnotallprimecreditcardsareentirelyoutofreachtoconsumerswithbadcredit.Andthefewcreditcardsthatareavailabletothem(knownasusub-primecards)typicallyrequireexorbitantsetupfeesorrecurringmonthlyfees,offerverylowcreditlines,oftenrequirecashdeposits,andinmostcasesdonotevenreportyourpositivecreditactivitytothecreditbureaus.AUtOmObileFinanCinaIfyouaremakingpaymentsonacar,youareprobablypayingbetween$5,000and$9,000morejustforhavingbadcredit.Thisaddedinterestshowsupeverymonthinahigherpayment.Takealook.$20,000carpaidover5years:CREDITSTATUSRATEPAYMENTCOSTOFBADCREDITPerfect10%$424.94$0.0()MildlyDamaged14%$465.37$4,722.54Damaged20%$529.88$8,593.30HOmeMOrtaaaeBadcreditinautofinancingcanreallyhurt,butitisnothingcomparedtothecostofbadcreditwhenahomeisinvolved.Atypicalhomecancostbetween$50,000and$130,000moreininterestifyouarebuyingthehomewithbadcredit.$100,000homepaidover30years:CREDITSTATUSRATEPAYMENTCOSTOFBADCREDITPerfect7%$655.30$0.00MildlyDamaged9%$804.62$50,155.24Damaged12%$1,028.61$130,791.63Asyoucansee,alowscorecancostyouhundredsofdollarspermonth.Itisimportanttoobtainandmaintainashighacreditscoreaspossible.Howarecreditscorescalculated?Themethodsofcalculatingyourcreditscoremaydifferslightlydependingonthecreditbureau.Whenobtainingyourscoreitisadaptedtoeachbureauandisgivenitsownname:Equifaxuses“Beacon"，TransUnionuses“Empirica'',andExperianusesuExperianZFairlsaac.nThesescoresarealsoreferredtoasyour"BureauScores.nSinceyourscoreisderivedfromyourbureaudata,itwillchangeeverytimeyourreportschange.Howeveryourscoreiscalculated,itwillalwaystakeintoconsiderationmanycategoriesofinformation.Noonepieceofinformationorfactordeterminesyourscore.Astheinformationinyourcreditreportchanges,theimportanceofoneorseveralfactorsmaychangeinyourcreditscore.Lenderslookatmanythingswhenmakingacreditdecision,includingyourincomeandthekindofcredityouareapplyingfor.However,yourcreditscoredoesnotreflectthesefactsasitonlyevaluatestheinformationretainedbythecreditreportingagency.Whatfactorsaffectyourcreditscore?Therearefivefactorswhichareusedincreditscoringcalculationsthatdetermineyouroverallcreditscore.PreViOUSCreditPerfOrrnanCe(PaVmemHiStOrV)35%Alenderwantstoknowwhatyourpaymenthistoryislike.Haveyoupaideverythingontime,areyoulateonanythingnow,etcEYourpaymenthistoryisjustonepieceofinformationusedincalculatingyourscore,althoughitcanbetheveryimportant. Paymenthistoryonyouraccounts.Theseincludecreditcards,retailaccounts(departmentstorecreditcards),installmentloans,financecompanyaccountsandmortgageloans. CollectionitemsandPublicrecords.Thisincludesjudgments,bankruptcies,suits,liens,collectionitemsandwageattachments.Mostoftheseareconsideredquiteserious,althougholderitemscoudlessthanrecentones. Itsallinthedetails.Thisincludesspecificdetailsonlateandmissedpayments.Negativeinformation/latepaysaredeterminedusingthreefactors.oRecency-Howlongagowasthelastdelinquency?Howoldisthelatepay?A30-daylatepaymentmadejustamonthagowilleffectyourscoremuchmorethana90-daylatepaymentfromfiveyearsago.oSeverity-Whatlevelofdelinquencywasreached?Howlatewasthepaymentmade?30days,60days,90daysorworstofall,isthepaymentstilloutstanding.oPrevalence-Howmanycreditobligationshavebeendelinquent?Theamountofnegativeitemsascomparedtoyourtotalamountofavailablecredit.Forinstance,5accountsshowing3latepaymentsismuchworsethan10accountsshowing4latepayments.Oneofthebiggestsubfactorsishowmanyaccountsshownolatepaym