Do you know what your credit score is? You can bet that any lender about to loan you money does and so should you. In fact, now you can get a free credit report once per year from each of the three major credit reporting agencies. Here is a portion of an article just recently published on Yahoo.
“FICO has just revealed for the first time what effects late payments and other items actually make to your credit score. Did you just max out your credit card? Expect a credit score drop of 10 to 45 points. File for bankruptcy? Your score will plummet by up to 240 points, and your odds of getting credit will nosedive with it. The “damage points” data, unveiled recently by FICO, are part of the most revealing glimpse into the firm’s once-secret — and still mysterious — credit scoring model. The new information discloses how many points borrowers’ scores will drop when they make the most-common mistakes.
In order to show just how badly a drop in your FICO score can hurt your wallet, we spoke with members of the home mortgage, auto and credit card lending industries. We presented hypothetical scenarios of a consumer who decided to apply for a $200,000, 30-year mortgage; a $20,000, five-year auto loan and a credit card. While all the industry insiders stressed that a FICO score isn’t the only factor in determining who gets credit and at what cost (other factors they cited include the borrower’s debt-to-income ratio and whether they have already established a relationship with the lender), they were able to provide an idea of what a borrower who had the following credit scores could expect.
For a Consumer Who Started With a FICO Score of 780: (a) Following a 30-day late payment, the consumer’s car loan rate would jump nearly 3 percent, costing the borrower $26 more each month, (b) Following a debt settlement, the consumer would pay as much as $109 more each month on a home mortgage. For a Consumer Who Started With a FICO Score of 680 (a) Following a 30-day late payment, the consumer would pay $41 more each month for a car loan, (b) Following a 30-day late payment, the consumer would pay as much as $95 more each month on a home mortgage, (c) Following a debt settlement, the consumer would no longer qualify for a credit card.
Those with good or excellent credit — so-called prime borrowers — put more points at risk with each mistake. For example, someone with an average credit score of 680 who pays a bill 30 days late will see a drop of 60 to 80 points. But for someone with an excellent credit score — 780 — that same delinquency can send a FICO score tumbling by 90 to 100 points.”
It is a great read for anyone about to apply for any type of financing. You can access the full article by clicking here (http://finance.yahoo.com/banking-budgeting/article/108239/fICO-reveals-how-common-credit-mistakes-affect-scores?mod=bb-creditreports).