Latest Business News
The Truth About Credit Scores: Unlocking the Best Benefits
Understanding Credit Score Ranges
According to Ted Rossman, Bankrate's senior industry analyst, once you reach the mid-700s, you are considered to have excellent credit, and there is no practical benefit to scoring any higher. Generally, a credit score between 740 and 750 will qualify you for the best terms with credit cards and auto loans, while a score of 760 will typically get you the best rates on mortgages.The Breakdown of Credit Score Ranges
To provide a clearer picture, here are the credit score ranges categorized by Experian: Poor (300-579), Fair (580-669), Good (670-739), Very Good (740-799), and Exceptional (800-850).The Impact of Every Point
While a credit score between 740 and 760 already offers favorable terms, every point counts if your score is below that threshold. Rossman emphasizes that every 20 points can make a significant difference in determining whether your credit is considered fair, good, or excellent.The Cost of a Half a Point
To illustrate the importance of credit scores, Rossman provides an example. Suppose you have a 675 credit score and qualify for a $300,000 mortgage with an interest rate of 7.5%. Over 30 years, you would pay around $36,000 more in total interest expenses compared to having a 700 credit score and receiving a 7% interest rate.The Myth of Carrying a Balance
Contrary to popular belief, carrying a balance from month to month on your credit card does not help raise your credit score. In fact, it only results in more interest charges. Instead, focus on lowering your credit utilization rate, which indicates how much of your available credit you are using at a given time.Lowering Credit Utilization
Financial experts recommend keeping your credit utilization below 30% to demonstrate responsible debt management to lenders. To calculate your credit utilization rate, divide your credit card balances by your total credit limit. Paying down outstanding debt or asking your lender to increase your line of credit can help lower your utilization rate.The Marathon of Raising Credit Scores
Raising your credit score is a long-term endeavor. While immediate improvements may not be visible, sticking to a consistent strategy, paying bills on time, and keeping debts low can eventually help you reach your desired credit score. In conclusion, understanding the nuances of credit scores is crucial for unlocking the best benefits. By maintaining a good credit score, managing credit utilization, and following responsible financial practices, individuals can navigate the world of credit and work towards their financial goals.Implications for New Businesses: The Power of Credit Scores
Understanding credit scores and their impact on financial opportunities can be crucial for new businesses. The insights provided by Ted Rossman, Bankrate's senior industry analyst, offer valuable lessons for entrepreneurs.Importance of Excellent Credit
For new businesses, maintaining a strong credit score can unlock the best terms for credit cards and loans, which are often essential for growth and operations. A score in the mid-700s is typically sufficient, highlighting the importance of responsible financial management.Every Point Counts
Just as every point counts in personal credit scores, so too does every point in a business's credit score. Small improvements can make a significant difference, potentially leading to better loan terms and lower interest rates.Responsible Debt Management
The emphasis on maintaining a low credit utilization rate applies to businesses as well. By managing debt responsibly and maintaining a low credit utilization rate, businesses can improve their credit scores and demonstrate their financial reliability to lenders. In conclusion, the principles of credit score management apply to both individuals and businesses. By understanding these principles and applying them effectively, new businesses can enhance their financial stability, unlock better financing opportunities, and set the stage for long-term success.Article First Published at: https://www.cnbc.com/2023/08/14/money-expert-theres-no-benefit-to-scoring-above-this-credit-score.html Brought to you by ChatGPT for www.BusinessFormation.io