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"Are We`There' Yet?"
By Eileen Galbraith



How many of us have had extended travel plans via a "road trip" and someone asked, "Are we there yet"? Of course this question usually comes up only 1 hour into the 4 or 5 hour road trip! Don't we all just want to "get there"? Where ever "there" is, we will need a plan of action, a road map, something to guide us along the journey.

That is exactly the same one must do to have great credit. We need a plan of action, something or someone to guide us in the right direction. How frustrating and painful it can be when you are applying for that much needed credit only to be turned down because your credit scores, FICO scores are too low. They just don't meet the lending requirements.

So you ask: what do I do, where is the problem, how do I fix this? And, the reply you usually get is that you simple must improve your credit scores. Improve them? I don't even know what they are! And, the frustration leads to worry which leads to stress which leads to more frustration and the cycle continues!

Well now you can end this stressful time in your life because you are going to get the credit know how that you need! We will answer the question, "Are we there yet?"
with simple steps that you can easily do to get "there"!

Let's start with what a FICO score is all about. Every time you submit an application for credit from a company, they take that information and determine if you are a credit worthy candidate for them. If so, that credit information then gets passed onto the three major credit reporting bureaus, Experian, Equifax and TransUnion.

The three credit bureaus created a personal credit file for you. This file houses all of the credit that has been extended to you and most of the information can stay on your credit report for up to 7 years. Some things like bankruptcies and tax liens will remain longer.

This is where the FICO scoring system comes into play. Your score is based on a lot of different pieces of information, but to keep this simple we will focus on 5 major components that make up your score. Your FICO scores range from 300-850. The higher the score the better interest rates you will be offered. It is in your best interest to have the highest scores possible.

1. Your payment history: how you pay your bills will make a big difference in your score because 35% of your FICO score is based on this one thing alone. Are you paying your bills on time, are you late one time or even more than once? Do you pay only the minimum due or are you paying it in full every month?

2. Amount of credit available (some refer to this as credit utilization, although it is a part of this): 30% of your FICO score is based on how much of the credit that you have available are you actually using. It is always best to pay your bill in full every month, but if you can not then you should only try to use only 20% or less. For example, if your credit limit is $1,000 then 20% of that will be $200. This shows how you are handling your credit.

3. Length of credit history: simply stated this is how old your credit file is. How long have you had credit? 15% of your score looks at the age of your accounts.

4. Types of credit: 10% of the score looks at what types of credit, or the mix of credit you have. Are there auto loans, mortgages, major bank cards and store credit cards?

5. Inquiries: the last 10% looks at how many new inquiries you have on your report. In other words, are you looking for new lines of credit, have you applied for new loans within the last 12 months?

Just understanding these simple 5 components will help you to get "there," and you will be on the road to credit worthiness!

I hope you have found this information very helpful. Look forward to another opportunity to share my experiences with you.




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About the Author

Eileen Galbraith, Credit Knowhow, LLC
3553 West Chester Pike #108
Newtown Square, PA 19073
1-888-659-5510

If you would like to re-print this article, please contact the author.
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