| When you apply for credit - be it in the form of credit | | | | 30% of your total credit available on your credit card |
| cards, car loans, or mortgages smart lenders want to | | | | your score will go down. Being over the 30% limit is a |
| know what risk they'd take by loaning money to you. | | | | sign that you are likely to max out your credit cards. |
| FICO scores are the credit scores most lenders use | | | | 3. What is in your debt basket? All debt is not created |
| to determine your credit risk. You have three FICO | | | | equal and 10% of your score is based on your credit |
| scores, one for each of the three credit bureaus: | | | | mix. Financial institutions will look at how much of your |
| Experian, TransUnion, and Equifax. | | | | debt is in revolving debt (credit cards) and how much |
| Your FICO score can affect how much you pay for a | | | | is in installment debt (car loans etc) A revolving debt |
| loan so the lower your score, the higher your interest | | | | (credit card debt) never goes away hence the name |
| rate will be and the more money you will be paying out | | | | revolving but installment debt e.g. car loans have an |
| for a loan every month. It can also affect how fast | | | | end in sight. So in order to improve your FICO score |
| you can get out of debt because the lower the score | | | | you want to pay your credit card debt first. |
| the higher your interest rate which might translate to | | | | 4. If you cannot afford don't buy it. Think twice before |
| higher monthly bills. In certain situations it is more likely | | | | opening new credit cards however tempting they |
| that the potential employer might check your credit | | | | might be. |
| score and this might influence whether you get that | | | | 5. Financial institutions will look at how long you have |
| job not. | | | | done business with a creditor and how well you have |
| In order to improve your credit scores you have to do | | | | made your payments. When you are in debt, it is easy |
| 5 things: | | | | to feel overwhelmed and you can start abdicating |
| 1. Always make sure to pay your bills on time. Thirty | | | | your responsibility of paying your debt. Just like weight |
| five percent of the total score is based on how well | | | | lose you know you did not grow fat overnight so you |
| you take responsibility for paying your bills on time. If | | | | cannot expect to lose the weight overnight. So the |
| you are applying for a loan financial institutions will | | | | same concept you would use when losing weight is to |
| check to see whether you have been responsible with | | | | make sure that you understand that getting out of |
| any other debt you might have taken earlier on. So | | | | debt is a process but one that is totally doable and |
| stop procrastinating and pay you bills on time! | | | | then the other thing is that start a little a time, take your |
| 2. The other percent of the credit score is based on | | | | smallest debt and tackle that one first. Make plans to |
| how much you actually owe on your revolving debt | | | | pay off your debt and stop becoming a slave to the |
| and this could be in form of credit cards; at least this is | | | | lender. You can trade in your fear and denial for the |
| the most common one. If you have used more than | | | | peace and confidence of having financial freedom. |