[et_pb_section admin_label=”section”][et_pb_row admin_label=”row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Average Credit Score for Home Buyer Mortgage Loans: 2017 Update” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

Average Credit Score for Home Buyer Mortgage Loans: 2017 Update

[/et_pb_text][/et_pb_column][/et_pb_row][et_pb_row admin_label=”Row”][et_pb_column type=”1_2″][et_pb_text admin_label=”According to Ellie Mae’s %22Origination Insight Report,%22 that was the average credit score among home buyers that went the mortgage loan route in April of 2017. Any credit score of 700 or above is typically considered a %22very good%22 score, characteristic of someone deemed to be a good consumer. When it comes to credit scores, higher is always better, and higher scores typically qualify consumers for lower home loan interest rates. This can represent a significant long-term savings on either a 15- or 30-year mortgage.” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

According to Ellie Mae’s “Origination Insight Report,” that was the average credit score among home buyers that went the mortgage loan route in April of 2017. Any credit score of 700 or above is typically considered a “very good” score, characteristic of someone deemed to be a good consumer. When it comes to credit scores, higher is always better, and higher scores typically qualify consumers for lower home loan interest rates. This can represent a significant long-term savings on either a 15- or 30-year mortgage.

[/et_pb_text][/et_pb_column][et_pb_column type=”1_2″][et_pb_image admin_label=”Average Credit Score for Home Buyer Mortgage Loans” src=”http://keycreditrepair.com/wp-content/uploads/2017/07/trident-mortgage-group-mortgage-loan-approval-with-keys-960×350.jpg” alt=”Average Credit Score for Home Buyer Mortgage Loans” title_text=”Average Credit Score for Home Buyer Mortgage Loans” show_in_lightbox=”off” url=”https://keycreditrepair.com/” url_new_window=”off” use_overlay=”off” animation=”left” sticky=”off” align=”left” force_fullwidth=”off” always_center_on_mobile=”on” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

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Home Buyer Credit Scores Explained

[/et_pb_text][et_pb_text admin_label=”While the 722 credit score is the average of all home buyers that sought a mortgage loan in the month of April 2017, the Ellie Mae report’s data analysis extends beyond just this. For instance, it includes credit score data based on the types of mortgages that were sought in the particular month. The average score for those who bought with a conventional mortgage was 753, for those who bought with an FHA loan, 684, and for those that purchased with a VA loan, 708. ” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

While the 722 credit score is the average of all home buyers that sought a mortgage loan in the month of April 2017, the Ellie Mae report’s data analysis extends beyond just this. For instance, it includes credit score data based on the types of mortgages that were sought in the particular month. The average score for those who bought with a conventional mortgage was 753, for those who bought with an FHA loan, 684, and for those that purchased with a VA loan, 708.

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Buying a Home with Good or Poor Credit

[/et_pb_text][et_pb_text admin_label=”While the 722 number was the average credit score for purchasing a home in April 2017, that’s not to say that those with lower credit scores that fall into the %22good,%22 %22fair%22 or %22poor%22 range would be unable to qualify for such a loan. However, if they are approved, their credit score will likely reflect the interest rate that would accompany their home loan. Generally speaking, the higher the credit score, the lower the interest rate. Over time, the savings can add up. In fact, consumers with good credit and low interest rates may save tens of thousands of dollars over the course of a home loan tenure compared to consumers with fair credit and high interest rates.” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

While the 722 number was the average credit score for purchasing a home in April 2017, that’s not to say that those with lower credit scores that fall into the “good,” “fair” or “poor” range would be unable to qualify for such a loan. However, if they are approved, their credit score will likely reflect the interest rate that would accompany their home loan. Generally speaking, the higher the credit score, the lower the interest rate. Over time, the savings can add up. In fact, consumers with good credit and low interest rates may save tens of thousands of dollars over the course of a home loan tenure compared to consumers with fair credit and high interest rates.

[/et_pb_text][et_pb_text admin_label=”So if you’re among the consumer base with a credit score that may be on the bubble of getting approved for a home loan or just want to boost your score to earn a better interest rate on a home loan, you might be wondering what you can do. Here’s a look at some credit repair tactics to think about:” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

So if you’re among the consumer base with a credit score that may be on the bubble of getting approved for a home loan or just want to boost your score to earn a better interest rate on a home loan, you might be wondering what you can do. Here’s a look at some credit repair tactics to think about:

[/et_pb_text][et_pb_text admin_label=”Pay all bills on time. Late payments can cause your credit score to take a hit, especially if you’re regularly doing it. Set reminders and alerts, or arrange for auto bill pay if you can. Pay down debts: Try to always keep your debt-to-credit ratio, or credit utilization, at about 30 percent for a better score. For instance, if you have a credit card limit of $10,000, try to carry a balance of no more than $3,000 at once. Reduce your debt by paying off high-interest loans and credit cards first. Check your credit report for errors.” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

  • Pay all bills on time. Late payments can cause your credit score to take a hit, especially if you’re regularly doing it. Set reminders and alerts, or arrange for auto bill pay if you can.
  • Pay down debts: Try to always keep your debt-to-credit ratio, or credit utilization, at about 30 percent for a better score. For instance, if you have a credit card limit of $10,000, try to carry a balance of no more than $3,000 at once.
  • Reduce your debt by paying off high-interest loans and credit cards first.
  • Check your credit report for errors.

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[et_pb_section admin_label=”section”][et_pb_row admin_label=”row”][et_pb_column type=”4_4″][et_pb_text admin_label=”New Credit Scoring Models Won’t Work if Lenders Ignore Them” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

New Credit Scoring Models Won’t Work if Lenders Ignore Them

[/et_pb_text][/et_pb_column][/et_pb_row][et_pb_row admin_label=”Row”][et_pb_column type=”1_2″][et_pb_text admin_label=”Chances are you’ve already heard some of the rumblings regarding the way new credit scoring models work. To recap, some of the newer models exclude any medical debt that consumers owe as well as the likes of settled delinquencies and collections. Under new scoring models, tax liens and civil judgments have also changed in the ways they are reported – all for the betterment of consumers. In a perfect world, this is great news for the consumer, as individuals are likely to see a boost in their credit scores and qualify for lower interest rates on long-term financed purchases like auto and mortgage loans. As a result of these changes, credit score boosts may be enough to qualify consumers that otherwise wouldn’t have even qualified for a loan. But there’s one problem – lenders aren’t embracing them to the same degree that consumers are. In fact, some are using old formulas to determine consumer risk that don’t exclude everything that we listed above. ” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

Chances are you’ve already heard some of the rumblings regarding the way new credit scoring models work. To recap, some of the newer models exclude any medical debt that consumers owe as well as the likes of settled delinquencies and collections. Under new scoring models, tax liens and civil judgments have also changed in the ways they are reported – all for the betterment of consumers. In a perfect world, this is great news for the consumer, as individuals are likely to see a boost in their credit scores and qualify for lower interest rates on long-term financed purchases like auto and mortgage loans.

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As a result of these changes, credit score boosts may be enough to qualify consumers that otherwise wouldn’t have even qualified for a loan.

But there’s one problem – lenders aren’t embracing them to the same degree that consumers are. In fact, some are using old formulas to determine consumer risk that don’t exclude everything that we listed above.

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Why Aren’t Lenders Using New Scoring Models?

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So just why aren’t the majority of lenders using the new scoring models and instead relying on old FICO scoring formulas? That’s a good question, and it’s one where the answer varies based on the lender. For instance, some lenders have stated that they’re too small and the older formulas are a better indication of potential consumer risk. Other lenders, conversely, say that they’re too big to institute changes in how they determine consumer risk and that any change this significant could be disruptive to the way that they do business. Then there are the lenders who are just simply putting off integrating such formulas.

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Whatever the reason, the true loser is the consumer in all of this. In a way, lender refusal to use new credit scoring formulas discourages responsible credit behavior. Think about it: Why should a consumer be motivated to pay off a collection if a settled collection is still going to be counted against them on their credit report and credit score? The refusal of lenders to adapt to the current times and the newer scoring models could actually prevent consumers from enacting credit repair strategies.

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Taking things a step further, the lender would also benefit by adopting these new scoring formulas. That’s because weighing consumers under the new scoring formulas would likely earn them new customers that may not have qualified for a loan before. New customers and more customers equal more revenue for a firm. Isn’t growing to become more profitable the goal of any business, big or small? Credit scoring is changing to become more consumer-friendly. Lenders need to be changing too. It should be a win-win for both parties involved.

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[et_pb_section admin_label=”section”][et_pb_row admin_label=”row”][et_pb_column type=”4_4″][et_pb_text admin_label=”5 Fascinating Things You (Probably) Didn’t Know About Credit Scores” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

5 Fascinating Things You (Probably) Didn’t Know About Credit Scores

[/et_pb_text][/et_pb_column][/et_pb_row][et_pb_row admin_label=”Row”][et_pb_column type=”1_2″][et_pb_text admin_label=”You’ve heard the old adage” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

You’ve heard the old adage about how “knowledge is power,” and perhaps nothing demonstrates this saying more than when it comes to knowing about your credit information. Yes, the more you know about these details of your consumer history and you’re able to make better decisions when it comes to your future behavior.

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First and foremost, it’s important to know your credit score, but it’s never a bad idea to brush up on some of the more intricate details that shape your score.

Here’s a look at five things you probably didn’t know about credit scores:

5 Interesting Credit Score Facts

  1. The big 5: Do you know the five factors that go into calculating your credit score? You should! Payment history is the largest single factor, worth 35 percent of your score. It validates the importance of paying your bills on time. Credit utilization ratio is next, at 30 percent. For a good lender-friendly ratio, keep it at 30 percent or less. Length of credit history factors into 15 percent of the score, and new credit and your credit mix each account for 10 percent of the score.
  2. 700: That’s the credit score of the average U.S. adult. A score of 700 is considered to be in the “good” category. This “good” category applies to scores between 670 and 739.
  3. Do you know your score? If you don’t know your score, you aren’t alone. In fact, it’s estimated that three out of every five Americans don’t know what their credit score is. That’s 60 percent of the country, and there’s really no excuse for it based on how important that three-digit number is to your purchasing power and how easy it has become to access.
  4. Credit report doesn’t equal credit score: Up to 20 percent of all credit reports contain some sort of error. That’s why it’s a good idea to utilize your right to obtain a free annual credit report. But contrary to what many believe, checking your credit report doesn’t permit you access to your actual credit score. We know it seems odd, but that’s the way it works. To get your score, check your credit card statements, subscribe to a free credit check website or talk to your bank or credit union.
  5. Late payments can do terrible things to your score: As we noted above, payment history is the largest consideration factor when it comes to calculating a credit score. Noting this, it probably doesn’t surprise you that late or skipped payments don’t bode well for your score. But what you may be surprised to learn is just how hurtful they can be. In fact, a 30-day late payment could cause your credit score to dip an entire 100 points! The lesson: Pay your bills on time!

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[et_pb_section admin_label=”section”][et_pb_row admin_label=”row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Credit Inquiries – Can They Drop Your Credit Score?” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

Credit Inquiries – Can They Drop Your Credit Score?

[/et_pb_text][/et_pb_column][/et_pb_row][et_pb_row admin_label=”Row”][et_pb_column type=”1_2″][et_pb_text admin_label=”Spring has sprung” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

Spring has sprung, which means the real estate market is heating up and many consumers throughout the United States will be taking advantage of the uptick in home inventory to search for that new home. But for the vast majority of Americans, in order to finance any purchase as significant as a new home, a mortgage loan is necessary.

[/et_pb_text][/et_pb_column][et_pb_column type=”1_2″][et_pb_image admin_label=”Image” src=”https://keycreditrepair.com/wp-content/uploads/2017/05/Capture111.png” alt=”Credit Inquiries – Can They Drop Your Credit Score?” title_text=”Credit Inquiries – Can They Drop Your Credit Score?” show_in_lightbox=”off” url_new_window=”off” use_overlay=”off” animation=”off” sticky=”off” align=”left” force_fullwidth=”off” always_center_on_mobile=”on” use_border_color=”off” border_color=”#ffffff” border_style=”solid” url=”https://www.facebook.com/KeyCreditRepair/videos/1524367967588050/”]

[/et_pb_image][/et_pb_column][/et_pb_row][et_pb_row admin_label=”Row”][et_pb_column type=”4_4″][et_pb_text admin_label=” At the same time” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

At the same time, however, it’s wise to shop around between lenders to see who can offer you the lowest interest rate so that you can save the most long-term over the loan terms. In order to do this, lenders need to pull your credit information.
This has a tendency to make consumers uneasy, simply because there’s a misconception out there that when lenders pull credit scores and credit reports, it can negatively impact your overall score.
That’s not the case, just so long as you meet the proper time criteria. Let us explain:

The 30-Day Rule

Not too long ago, if you wanted to buy a home, you’d just call up various mortgage lenders to see what they were offering when it came to interest rates. Times have obviously changed. Now, we’re at the point where a full application needs to be filed – complete with a credit check, income assessment, etc. – as a means of getting preapproved. So, say you file an application with five different lenders. Will all the credit inquiries that occur cause your score to drop?

The answer is “no,” and here’s why: Because those who are shopping mortgage lenders are likely to consider more than one lender, any credit scores and credit reports pulled for such purposes will be ignored so long as they all occur within a 30-day period. It’s only natural for consumers to try to secure the best interest rate possible on such a large purchase, so there’s an exception to be made in such a case. While we’ve used mortgage lending in this example, the same is also true for auto lending and student loans – two other respective fairly large purchases that consumers may elect to shop around for rates pertaining to.

So for those of you out there concerned with what will happen to your credit score – and the possible credit repair you may have to administer – should you shop around when it comes to lenders, just make sure that any of this shopping around occurs within the same 30-day period and your score won’t be impacted in any way.

Go ahead and chase that dream home. You’re not going to be punished for getting preapproved by more than one lender. Just be sure to meet the time requirements. Check out this video for more information.

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[et_pb_section admin_label=”section”][et_pb_row admin_label=”Row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Tax Liens, Judgments Could Be Omitted from Credit Reports in Near Future” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

Tax Liens, Judgments Could Be Omitted from Credit Reports in Near Future

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For tax liens The Consumer Financial Protection Bureau (CFPB) has been winning a lot of battles for the people lately. Aside from socking Equifax and TransUnion with fines for deceiving consumers back in January. More recently, it hit Experian with a $3 million fine for the same thing in March. Now, it’s recently championed an effort to change the way tax liens and judgments are reported on your credit record. It’s a major shakeup when it comes to credit reporting.

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Specifically, per a report in the Wall Street Journal, Experian, Equifax and TransUnion – the three major credit reporting agencies – will soon be readjusting their respective credit reporting models to omit tax liens and judgments. It’s a move that could help out millions of Americans when it comes taking control of their finances in the future.

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What This Means

This move looks to help out millions of consumers and could very well raise the overall average credit score nationwide. This news is especially significant when you consider how crippling tax liens and judgments currently are to most consumers. Presently, tax liens and judgments, even if they’ve been resolved, can stay on a credit report for up to 10 years. That’s right, even if they’ve been paid off, a consumer’s best bet is to get it released and then petition the credit agencies to remove it from their record to avoid extensive credit repair.

Unresolved liens and judgments stay on a credit report for 15 years.

To be fair, there’s still some things that we don’t yet know when it comes to this news. For instance, will consumers have to petition the agencies to have liens and judgments removed? Or will the agencies perform this automatically? That’s an unknown. What’s not an unknown, however, is how positive a move like this can be for consumers.

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Not Everyone’s Happy About It

While consumers should be welcoming this news, not everyone is happy about it. For instance, this report is putting lenders a little bit on edge. Why? Simple – it provides less data for them to assess consumer risk. When lenders make the decision on whether or not to approve a loan, it becomes a question largely of how reliable of a consumer they’re working with. A tax lien or judgment on one’s credit report would certainly factor into their decision, and being that it can take up to 15 years for such to be removed from an individual’s credit report, it provides lenders with more of a comprehensive history of consumer behavior. This news, obviously, alters that, giving lenders one less thing to ultimately analyze. In a worst-case-scenario situation, it could wind up burning a lender in the long run.

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[et_pb_section admin_label=”section”][et_pb_row admin_label=”Row”][et_pb_column type=”4_4″][et_pb_text admin_label=”How to Build Your Credit Score Back Up After Foreclosure or Short Sale” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

How to Build Your Credit Score Back Up After Foreclosure or Short Sale?

How to Build Your Credit Score Back Up After Foreclosure or Short Sale?

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Credit Score, Foreclosure, Short Sale. Credit Score after Foreclosure or Short Sale. So you’ve foreclosed on a home or had to sell for less than what you owed on the home? You probably think you’re doomed as a consumer moving forward. And while a short sale or foreclosure is never something that you want to have on your credit report, neither is a be-all, end-all when it comes to purchasing power. However, it should go without saying that either a foreclosure or short sale will require consumers to enact some credit repair.

[/et_pb_text][/et_pb_column][et_pb_column type=”1_2″][et_pb_image admin_label=”Image” src=”https://keycreditrepair.com/wp-content/uploads/2017/04/foreclousre.jpg” show_in_lightbox=”off” url_new_window=”off” use_overlay=”off” animation=”off” sticky=”off” align=”left” force_fullwidth=”off” always_center_on_mobile=”on” use_border_color=”off” border_color=”#ffffff” border_style=”solid” alt=”Credit Score after foreclosure” title_text=”Credit Score after foreclosure”]

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How to Build Your Credit Score After Foreclosure or Short Sale

Credit Score after foreclosure. Just how to you go about rebuilding credit after a short sale or foreclosure? Here’s a closer look:

Rebuilding Credit After Foreclosure/Short Sale

The first thing that you should do after a foreclosure or short sale is put it in the past. Yes, it happened. Yes, it’s unfortunate. Yes, it’s not going to look great on your credit report and it’s going to hurt your credit score. But like we said in the opening, it’s not a be-all, end-all. So put it in the past. It’s over with. While the short sale or foreclosure will stay on your credit report as a negative part of your history, that doesn’t mean that you can’t build positive activity beyond that. The goal for a consumer following a short sale or foreclosure is to build positive activity to make the negative on the credit report look like nothing more than a blip on the radar. Here’s how to do it:

  • Immediately work to start (or continue) at least three positive lines of credit: Whether it’s a secure credit card, personal loan or some other type of account, these lines of credit are all ideal opportunities to build positive activity. Since the FICO score weighs consumer behavior on making on time payments, credit history and credit utilization, you can put the negative of a foreclosure or short sale in the past by building positive activity with at least three accounts. Perhaps you have a healthy account or two opened? Great! Keep up the good work with it.
  • How to build positive credit: Like we hinted at in the last bullet point, the best way to build positive credit is to make on-time payments and keep balances low.

If you follow the two steps above following a foreclosure or short sale, it’s not uncommon to see a significant improvement in your credit score within as little as six months. In fact, it’s not out of the realm of possibility for those with credit scores in the low 500s to see their scores increase into the high 600s or even the 700s after a foreclosure or short sale by building positive activity. Just remember, it’s not a quick fix – it take a little bit of time.

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Getting preapproved for a mortgage loan

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Spring has sprung, and beyond just the greening of grass, warming temperatures and longer days, it’s also a period of the year that sees a significant uptick in real estate activity. Yes, with an increase in overall inventory come spring, the season is an ideal one for buyers on the hunt for their next home. But before you can buy, you need to get preapproved mortgage. Unfortunately, getting preapproved is easier for some consumers than it is for others. Some consumers may need to enact some credit repair tactics to get their credit score where it needs to be for home buying

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Improving Credit Scores for Preapproval

If your credit score isn’t up to snuff and you don’t want to wait months to repair it, there are some things that you can do now that may improve your score faster, assuming that your score was dinged because of something minor, like a late payment. More sever credit mishaps like defaulted payments, bankruptcies and foreclosures will obviously require much more time for consumers to repair, but there is hope to eliminate something minor like a late payment that could be preventing you from getting preapproved for that mortgage loan. Here’s what to do:

  • Act quick: Start by contacting the company that reported the late payment and explain the situation. Perhaps you thought you made the payment, but there was an online bill error. Or maybe it was an honest mistake on your part and you didn’t pay the bill in full. Regardless of who – or what – is at fault, come clean and explain the situation. You may even choose to enact a one-time goodwill intervention, where a company will review the case, analyze your credit and make the call on whether or not to reverse the decision. Remember, lenders want to keep your business, so if you work together with them, your chances are good.
  • Contact the credit reporting agencies: If you don’t get anywhere with the lender, consider writing the credit reporting agencies. Explain the scenario to them, and they’ll conduct a 30-day investigation to determine whether or not the lender’s decision should be reversed. This method may take a little longer than working with the lender, but if the agency rules in your favor, it can help improve your FICO score to the point where you can get preapproved.

Unfortunately, some mortgage consumers don’t have great credit and won’t be able to fix their issues by contacting either their lender or the credit reporting agencies to have the issue resolved. If this is the case, the consumer’s best bet is to start establishing good financial behavior. This includes making on time payments and keeping low balances on credit cards, just to name a few.

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FICO Credit Score? A crucial aspect of knowing whether or not you’re in need of credit repair is obviously learning what your actual credit score is. After all, those crucial three digits are what lenders look at when deciding how at-risk of a consumer you are and whether or not your application should be approved or denied on everything from mortgage loans to auto loans to student loans. But how consumers attain this credit score information is a topic that has always been up for debate.

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The aspect of how to attain credit scores recently made headlines again, as two of the leading credit reporting agencies in the United States were fined for allegedly charging consumers to check their credit scores – a practice viewed as unethical and misleading by the Consumer Financial Protection Bureau. In light of these recent events, the question remains: Should consumers pay for their FICO scores? Or should they rely on free avenues for attaining this crucial data?

FICO Credit Score. Where to Get Free?

Most experts advise consumers to check their credit scores and credit reports at least once a year. This is suggested even for consumers with very good credit, as checking such information annually can help detect potential errors and lead to quicker all-around fixes. Federal law permits consumers to attain credit reports free of charge from the three main credit reporting agencies once a year. Consumers that are looking to repair credit to make themselves more attractive on a loan or credit card application, however, may need to check their scores more frequently than annually to judge where they stand. The good news is that more and more outlets are making it easier to do this on a complimentary basis.

Here’s a look at some of these free avenues available for checking your FICO Credit Score:

  • Your bank or credit union: Many financial institutions will offer free credit score checks for members. Some may even offer complimentary consulting services to help consumers reach their credit score goals.
  • Your credit card company: Credit card companies like Discover now offer free credit scores to both cardholders and non-cardholders. Citi and Chase have similar policies. Others may provide your credit score if you simply ask.
  • Websites: If you go the route of getting your credit score through a website, it’s important to make sure that the site is a credible one (i.e. CreditKarma) and that you aren’t supplying your credit card information for the service. Credible credit reporting websites will help provide you regular credit score updates, as well as provide guidance on potential purchases based on your score.
  • Applications: Applying for a new credit card, car loan, or refinancing? As part of the approval process, the lender will be surely checking your credit score to make sure you qualify. Take advantage of this situation to learn what your credit score is.

We should note that you can buy your credit score. However, you should only ever consider doing so when you’ve either exhausted the options that we’ve listed above or if none of the aforementioned complimentary means of acquisition are viable for FICO Credit Score.

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All credit cards have some sort of a credit limit, which is the maximum amount that you can charge to the respective account before any charges are void. However, this credit limit isn’t information that consumers are typically privy to – unless they apply for the card, that is. That’s largely because before a creditor can issue any sort of a limit, it has to know your credit score as well as other crucial information, like how much money you make, your monthly debt obligations, credit report history and more.

The Rule of Thumb

Just because you won’t get the specifics of your credit limit until you’ve gone through the application process – and become approved – doesn’t mean that you can’t have a general idea of what it’s likely to be. Generally speaking, your credit limit is about double your monthly income, minus any debt obligations you have. So, for instance, if you make $5,000 a month and have debt obligations of $2,000 per month, your credit limit is likely to be in the $6,000 range. While this is the general rule of thumb, the key word is “general,” as there’s no true universal method and each creditor typically uses their own respective formulas.

Anatomy of the Credit Limit

There’s typically a lot that goes into the credit limit that creditors issue when you apply for a credit card. Here’s a brief overview of what helps make up this limit, aside from your monthly income and debts owed:

  • Credit score: The better your credit score, the less interest you’re likely to pay on purchases. You’re also more likely to have a higher credit limit, as a good credit score shows that you’re a reliable, responsible consumer that can adequately repay any credit card debt. Data shows, for example, that consumers with a FICO score of 720 or greater had an average credit limit of at least $8,000. Conversely, those with FICO scores at or below 620 had a significantly lower limit at an average of $700. So if you want a high limit and your credit score is sub-par, we’d recommend enacting some credit repair best practices prior to applying.
  • Payability: Credit limit is also largely contingent on a consumer’s ability to pay. Noting this, things like debt-to-income ratio, debt-to-asset ratio and consumer income after any debt is paid are all major factors that play into credit card limit.
  • Risk: This factor isn’t so much pertaining to your potential risk as a consumer, but any economic risk based on what’s going on in the world. For instance, during the Great Recession, credit cards were issued with much lower limits than what was issued before and after the economic downturn. Creditors often don’t want to chance a situation where you’ll max out your limit and be unable to repay debt.

It’s also important to note that the credit limit you initially receive should be thought of as more of a starting point. If a creditor sees that you’ve been responsible with your card, you’ll often see your limit increase over time. If the creditor doesn’t do this for you, you can even put in a limit increase request.