Why You Need To Improve Your Credit Score? By Cornie Herring Have you check your score? Do you know how high your score is? Many people only pay attention to their score when they need it for any application. If you just realize you have low score at the time you need it for a loan or application, it might not help in getting the best rate because the best interest rate of any loan or always offer to the person with high score and time is needed to rebuild your low score. Hence, it's better to pay attention to your score now and put your efforts to improve it if you found it low.
The three major bureaus: Equifax, Experian and TransUnion collect data from your lenders about your history of borrowing and paying back credit. The information is then being compiled into your reports. The company like FICO will then takes the information from your credits and applied a trade-secret formula to produce one score ranging from 300 to 850 based on your history. The more excellent of your history, the higher score you will get.
Top tier scores are range from 760 to 850. People who fall into the top tier scores are expected to get the lower interest rates as they are categorized as the lowest risk group by the lenders and this group has more choices to select their favorite loan package with more attractive offers. In general, a score about 500 to520 is the lowest acceptance level for many lenders to approve any loan or mortgage application. If your score is fall in this low acceptance range, you can be expected to be quoted significantly higher interest rates and may be offered with fewer varieties of loan offers. Any score below 500 has very low chances to be approved for any unless you go for secured loan.
Example below will give you a better picture on how the score will affect the interest rates of credit:
760 to 850 tier: Interest rate = 5.78%
700 to 759 tier: Interest rate = 6.00%
660 to 699 tier: Interest rate = 6.30%
620 to 659 tier: Interest rate = 7.10%
580 to 619 tier: Interest rate = 8.58%
500 to 579 tier: Interest rate = 9.50%
Let assume if you score is top tier (760 to 850) and you care being approved for $100,000 mortgage with 30 years term; the total interest for this $100,000 mortgage over 30 years is $110,772. Whereas, if your score is at bottom tier (500 to 579), the same $100,000 mortgage, the total interest over 30 years will be $202,709. You are paying about $92,000 extra interest just because your score is at bottom tier as compare to if you score is at top tier. That's why you need to get the highest possible score so that you can save more money in term of interest for any you apply for.
Even your score is not as bad as fall into the bottom
tier, as long as your score is not in the top tier, it worth for you to work it out to improve your score so that your score is fall into the 760 to 850 range so that you have more options to get the best offers whenever you need to apply for a credit.
Summary
Lenders measure your history based on score, the higher score the lower risk as seen by the lenders and you are at a better position to get better offers. Hence, it worth for you to improve your score if you r score is not fall into the top tier range.
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