A good credit rating is money within the bank with regard to consumers

A good credit rating is more important than ever. The credit crunch has raised the bar on credit scores. To get anywhere with a lender and qualify for a good interest rate, a higher credit rating could be necessary for most people. A better credit score saves money with better interest rates.A poorly maintained credit rating can make borrowing cash costly. A FICO credit score of 650 is considered fair to poor. When a Fico rating enters 750 territories, that’s fairly darn good. An elite group of individuals make the effort to surpass 800. A man in Arkansas is doing every little thing he can to achieve a Fico credit score of eight hundred fifty. The payoff for his dedication might be a retirement free of financial worry.

What the eight hundred fifty Fico score means

A FICO credit score of eight hundred fifty has been achieved by .5 percent of Americans, according to Fico. Chris Plepinski of Rogers, Ark. was featured in a CNN article about his plan for joining that exclusive club. Plepinski’s current FICO score is higher than 82 percent of the population at 813. Over the course of his life, Plepinski’s unusually high score could conserve him hundreds of thousands of dollars. Nevertheless, he told CNN that nothing short of eight hundred fifty will be satisfactory. To get there, Peplinski scrutinizes all the aspects Fico uses to determine credit ratings. He checks his FICO score each and every 90 days and adjusts his personal finances to squeeze out every feasible point. To add variety to his credit mix, which can boost a score, he got a auto loan, despite the fact that he could have paid cash.

Inside look at the Fico rating

Data on credit activity from Equifax, Experian and TransUnion is collected by Fico to produce credit ratings. As reported by Bankrate.com, the spread of FICO scores goes from the low 300s to 800 and above. The formula isn’t really overly complex. The final number is reached by calculating the credit aspects listed below:

Payment history – 35 percent

Total debt load – 30 percent

Length of established credit – 15 percent

Types of available credit – 10 percent

Recent new credit – 10 percent

Using these factors as a guide, timely payments, reconciling overlooked payments, reducing balances on revolving credit (charge cards), paying down rather than transferring balances, staying away from new debt and keeping existing credit cards nominally active are helpful for raising credit scores.

The reason why increasing any credit rating matters

A fair-to-poor credit rating can cost a fortune over a lifetime, according to Liz Pulliam Weston at MSN Money. Weston penciled out a comparison between two people over 50 years. She ran a comparison based on the interest rates each person could expect for many of life’s financial milestones. The transactions included student loans, automobile loans, credit card offers, a mortgage and home equity borrowing. Over a lifetime of borrowing, the person with the 650 credit score paid $201, 712 more than the person with a 750 score. Assuming an 8 percent return, Weston factored $201,712 into 50 years. The person with the 750 FICO score could invest the interest saved and possibly accumulate a retirement account of $2.3 million.

Further reading

CNN

money.cnn.com

Bankrate

bankrate.com

MSN Money Central

moneycentral.msn.com