Posts Tagged ‘FICO score’

How Many Credit Cards Are Too Many?

There is no hard and fast answer for this question. It is true that lenders look at open credit lines as a temptation to get into more debt, but it is far more important to look at your debt-to-income ratio than just your total number of credit cards. In fact, your debt- to- income ratio can tell you if you, as an individual, are carrying too many credit cards.

Your debt-to-income ratio is your total amount of debt divided by your income. To be safe, this number should never be greater than 25%. When you apply for a loan, the lender may look at your credit file and take all of your available credit, even if you haven’t used it, and do this calculation to see what your debt-to-income ratio could become should you max out all of your credit cards. If the number is greater than 30%, then the lender will likely consider you a higher risk.

You can do this calculation yourself and if your debt-to-income ratio, with all of your credit lines maxed out is greater than 30%, then you probably are carrying too much plastic. You should consider closing some of your open accounts. Be careful, though, not to close your oldest credit accounts. Doing this will negatively affect your FICO score since account age is one of the influencing factors.

American Credit Scores: Another Casualty of the Great Recession

A full quarter of American consumers, 25.5%, now have credit scores of 599 or below, according to a recent sampling by FICO Inc.  People with scores this low are unlikely to qualify for any sort of consumer lending. They will be unable to get a credit card, buy a car, or a home.

As unemployment and foreclosures continue to plague the economy, more and more people will lose ground on this important metric for consumer lending. FICO expects the percentage of people with low credit scores will continue to rise in the near term, since credit reporting often lags behind late payments and the economy has gotten no better.

On the flip side, the percentage of consumers with scores of 800 and above has also increased over historic levels to 17.9%.  This means that anyone who has managed to hold on to his job and is still doing relatively well is being very cautious and paying down what he owes.

The effects of plummeting credit scores will be felt for years since banks have tightened lending standards recently. Even people with scores in the medium range of 650 to 699 will find it harder to obtain financing at a decent interest rate. Those with scores below that will be unable to find financing at any rate, and it will take years for them to recover what they’ve lost.

Related articles:

How To Rebuild Your Credit Rating

See Your FICO Score

People With High FICO Scores More Likely To Default On Mortgage Than Credit Cards

A FICO  report released in February of this year reveals that people with high FICO scores (between 760 and 850) have a higher default rate on mortgages than on credit cards. From May through October 2009 the default rate for this group was .32 percent for mortgages and .12 percent for credit cards. This is an increase as compared to .08 percent for mortgages and .10 percent for credit cards in 2007.

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What Is A Good FICO Credit Score In 2010?

Your FICO score is one of the factors that lenders use to determine whether or not they will approve you for a credit card, auto loan or mortgage. Your credit score is also a factor in the amount of interest you will have to pay if you are offered a loan or credit. The higher your credit score is, the easier it is for you to qualify for credit cards and loans and the better terms you will get. FICO scores range from 300 to 850. Naturally, you might wonder what is a good FICO credit score?

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Understanding Your Credit Report Score

credit-score-1 Understanding your credit report score can sometimes be like trying to decipher ancient Egyptian hieroglyphics. Until recently, the score itself and the methods for calculating it were a complete secret.

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