Repair Bad Credit – Is Repairing Bad Credit Really That Important?
There are some people who have gone through the anxieties of unmanageable debt and would prefer to live on a cash basis, that is, they would rather pay for all their future purchases with cash. Some people have had the traumatic experience of filing for bankruptcy, and have sworn to use only debit cards and never apply for another loan. However, there are simply some major purchases that cannot be avoided for which one would need a loan.
If you find yourself in this latter category, you would discover that lenders put a great deal of importance on your credit score. The largest home funding company in the US, the Federal National Mortgage Association, more commonly known as Fannie Mae, has included a minimum credit score among its requirements for prospective borrowers. As of December 2009, Fannie Mae’s minimum credit score requirement was 620.
Car lenders on the average stipulate interest rates ranging from 7% for credit scores of 690 and above, and 15% for credit scores of around 500 to 589 for a 3-year loan. This means that for a difference of around 100 to 200 points on your credit score, you stand to save or lose around $2,500 throughout the life of a loan, depending on whether your score belongs to the higher or lower credit score bracket.
Based on this information, it is really worth your time and effort to focus on improving your credit reputation.
Your credit score is calculated based on formula that takes into consideration varied aspects of your credit history. 15% of your credit score comes from the length of your credit history. The longer your credit history is, the greater the impact on your credit score. 35% is attributable to your payment history. The more remove late payments you have on your bills, the lower your credit score. Credit utilization accounts for 30% of your credit score. This is the ratio of your total debt to your total credit limits. The remaining 20% is split between the amount of credit inquiries you authorize, and your possession of a mixture of different types of debts. Each authorized credit inquiry is recorded as a negative item on your credit report, while the possession of varied debts is deemed a positive indication of an ability to manage different types of credit.
