Since I'm part of the real estate and auto loans industry, I've met quite a few people who are clueless about credit.
So here's my two cents. Call it "Credit for Dummies".
I'm always happy to help answer any credit related questions, free of charge of course. Or go to Homes in Issaquah Forum and post your anonymous questions in the Credit Related Questions section.
Credit Score Range : Credit scores range from 300 to 850, with 850 being the best score you can get. Anything over 700 is generally "very good". Having a score of over 700 generally qualifies you for "prime" interest rates when applying for an auto loan or mortgage.
What's a Prime Rate? : Prime rates are the low interest rates shown at banks. As many people know, if a bank is advertising 6% interest rates on a loan, they probably only qualify for 8% or so, depending on their credit score. Of course, the higher your credit score, the lower your interest rate. If you have a bad score, your interest rate can be 2 or 3 times the prime rate.
Average Credit Score : The national average is 676 according to MSN Money.
What's a bad score? : Anything below 550 is considered awful according to CreditScoring.com.
What are my options? : If you have a terrible credit score, there are other ways to get a loan. You can use sub-prime lenders who usually charge a higher interest rate than typical walk-in banks. You can find cosigners (but I don't recommend this except in rare instances). However, if you have a bankruptcy and a lot of charge-offs on your credit report, using a sub-prime lender may be your only option (they specialize in first-time and bankruptcy clients).
What does my credit report show? : There are 4 categories on your credit report. Real Estate / Mortgage, Installment Accounts, Revolving Accounts, and Other Accounts. Having a little bit of each type of account, keeping your balances low, being on time with your payments, and showing a strong history of paying on time will all improve your credit score.
What doesn't my credit report show? : Your credit report does not reveal your nationality, income, amount of money in your bank account, level of education, or sex. It is merely to paint a picture about your financial responsibility.
Ask more questions at the Homes in Issaquah Forum
I've seen more than my share of sub-550 credit scores. Now, you may ask, how does your credit score get this low? Usually via multiple bankruptcies, pages of collections, spending more than your credit limit on your credit cards, and having multiple cars repossessed.
This isn't to poke fun at those people however. Think of the family of 4 that is being supported by a $10 / hour job. After rent, car payments, food, there isn't much left. With that said, I've seen people in similar situations with vastly different credit scores.
Many people just aren't educated about credit. There is no shame in this. Just keep in mind that help is free (even credit reports are free) and you shouldn't have to pay a fee to have your credit repaired. People in difficult situations may feel vulnerable (bankruptcies, divorces, illnesses, injuries), and if you find yourself in a similar situation, watch out for people who are ready to take advantage of you. They could make a bad situation even worse.
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