Financial experts tell us that only around 40% of consumers have what is called Prime Credit standing in the industry, meaning that their credit scores from all of the three major credit bureaus are at or above 700. This kind of credit score should be everyone’s goal, since having a score of over 700 means that your score will not be negatively affected by many of the things which can damage a lower score, such as inquiries and late payments.
A credit score of under 700 from all three of the credit bureaus means that you will be perceived as a higher risk (as are 60% of consumers) and in this case, it’s hard to tell just what will affect your credit score and whether it will be for better or worse. For example, getting a loan under these conditions may actually decrease your score!
The credit scoring system is fixed? The credit bureaus have made it very hard to get a score of 700 and up because the lenders who fund the credit bureaus make more money in interest payments from consumers with lower credit scores. If you have a score of less than 700, then you need a fast score system to get you into a position where you’re not forking over any more of your hard-earned cash then you have to.
One thing you can do to keep your credit score up is to never incur more than 25% of your annual net income in debt. You can talk to your accountant or simply look over your tax returns to find this number. Whenever you use credit to make a purchase, make sure that you really need it and that this won’t cause your debt to go over this 25% limit.
The credit reporting system is deeply flawed, since everyone but the consumer benefits from the system. Consumers have long lobbied for change and with the 2004 Fair Credit Reporting Act, some reforms were made; but unfortunately it did nothing to require the credit reporting bureaus to maintain accurate information and of course, many question how strictly the stipulations of this act are enforced if indeed they are at all.
For instance, let’s say that you have a credit score of 600 and you’re applying for a loan. Whether or not your loan application is approved, your credit score drops by 35 points! If you had a credit score over 700, then your credit score would have been unaffected by this inquiry. A fast score system can help you to get your score over 700 so you can avoid all of these hassles.
You should be very careful about credit repair services as well. While they can indeed have some of the negative items on your report removed, be aware that this can actually lower your credit score. If your credit score is under 700, you’re better off not removing these items at least not right away. Instead, add new accounts in good standing to balance out the negative items. Your concern should be improving your credit score instead of simply making your report “look” better.