Understanding Your Credit Score

Understanding Your Credit Score

Slide1They’re everywhere you look—credit card applications making promises of reduced prices, extra points, and savings galore. While responsible credit management is a good idea (just ask Jason Hartman), credit cards are often confusing. More, your credit score can be confusing, which often prevents people from checking up on it.

In addition to notifying you of potential problems, your credit score serves as an indicator of your credit health and debt to income ratio. But what is a healthy credit score? What score is required to be approved for a new credit card? If you’ve got a credit score of 780 or above, you’ll have no trouble with anything. Congrats, you’ve got a great score! If your score is around 700, you’ll likely be approved for most things. If it is 650, you’re average and may be denied, and if you’re sitting around 500, obtaining another credit card may be difficult for you.

To obtain a high credit rating, make timely payments for five or ten years on your credit cards, student loans, and mortgage. This credit rating might take awhile to achieve, as it requires time. To have a good score, use your credit card (and pay it off) for a few years. If you’re falling into the average or low category, it’s probably because you’ve missed a few payments or have been sent to collections or foreclosure.

Even with good credit, there is a chance you will be denied for a credit card. This might happen because you have too much debt—high, unpaid balances on existing cards. It might also be the result of too much credit already available to you or a short credit history. Recent late payments may also prevent you from being approved. Similarly, a low score doesn’t necessarily mean you won’t get approved for any cards—different banks and companies have different rules, and they’ll often work with you to find a card that best meets both of your needs.

Make sure that you know your credit score and check your credit report before applying for new lines of credit, and be knowledgeable about when to apply for cards to increase your chances of approval. If you have questions about how to increase your credit score, don’t hesitate to talk to a qualified financial advisor who will be able to go over the specifics of your financial situation and best advise you. (http://www.flickr.com/photos/ameriswede/2500097744/)

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The Young Wealth Team