Terms You Should Know

Annual Percentage Rate – The interest rate which reflects all of the costs of financing. This rate will probably be higher than the original interest rate quote because it includes all of the other costs of getting credit, such as loan fees.

Bad Credit – A term used to describe a poor credit rating, usually a credit score below 650. Common practices that can damage a credit rating include making late payments, skipping payments, exceeding card limits or declaring bankruptcy. “Bad Credit” can result in being denied credit.

Balance – The total amount of money owed. It includes any unpaid balance from the previous month, new purchases, cash advances, and any charges such as an annual fee, late fee or interest.

Collateral – Property that is offered to secure a loan or other credit and becomes subject to seizure on default. (Also called security.)

Credit History – A partial profile of your financial life, given within a particular time frame (usually measured in years). Your credit history shows the extent to which you pay your bills on time and how much you owe.

Credit Report – A report that displays a person’s credit history. A lender orders this report from a credit bureau when you apply for credit and often make their decision on issuing credit based on the credit score.

Credit Score – A score ranging from 300 to 900 which reflects the credit worthiness of a borrower. The score is determined by payment history, credit ratio, length of credit history, types of credit and credit inquires.

Debt to Income Ratio – A ratio that is computed by dividing the amount of total debt by the total income. Lenders use a debt to income ratio to help them determine an applicant’s capacity to repay a loan.

Finance Charge – Interest and fees billed to you on your statement for using the credit.

Minimum Payment – The lowest amount of money that you are required to pay on your credit card statement each month. Usually this payment is 3% – 5% of your current balance.

Secured Credit – This type of credit requires that you provide something of value to guarantee repayment (i.e car loan, boat loan, mortgage loan).

Unsecured Credit Cards – Credit cards that are not secured by collateral. Customers qualify for such cards based on their credit history, their financial strength and their earnings.

Equifax Personal and Business Solutions: Your Credit Score Report is in Good Hands

The purchase of a new home, a new family sedan, or starting a business is some of the reasons why people take out loans. These assets could cost you tens to hundreds of thousands of dollars each, thus it will really be a huge financial burden to acquire these properties using cold cash. Taking out a loan (whether it requires you a collateral or not) will help you in making the purchases of these properties.

However, there are two facades in taking out a loan—its either you win and take it all or you lose and go home with nothing at all but a sad face.

Your success or failure in taking out a loan depends on a variety of factors, yet your credit score is the most significant factor whether you are eligible for the loan of your choice or not.

The rule is simple: if you have a good credit score, you have high chances of getting the loan of your choice. On the other hand, if you have a bad credit score, you have slim chances of doing so. Instead, your lender will provide you a selection of loans with a common base—high interest payments.

Before applying for any loan that you need, you must understand the role of a FICO credit scoring system, which is the standard for the credit score used by most lenders in determining how risky you are to be loaned money to. FICO (Fair ISAAC & Company) is the leading credit report agency that loan providers turn to with regards to credit scoring for any loan application. In other words, if you possess a bad credit history, the lenders will know your credit situation and decide on your loan application based on your credit history.

Here is the summary of the FICO credit score classification:

• If you have a credit score of more than 700, you are eligible for a loan with the best interest rate under excellent terms.

• If you have a credit score of between 640 and 700, you will be able to qualify for 125 percent of your preferred loan.

• If you have a credit score of between 600 and 640, you will be able to get your preferred loan without making down payment.

• If you have a credit score of between 500 and 600, you will be eligible to your preferred loan provided you are willing to make a down payment.

• If you have a credit score of less than 500, there is a slim chance that you get your preferred loan.

Once you determined your credit situation and you think you can secure a loan, you need to have a credit report to be submitted to your preferred lender. There are hundreds of credit companies that furnish reports to commercial lenders, but you might want to try the services offered by Equifax Personal and Business Solutions and see yourself getting approved for the loan that you have applied for.

Equifax Personal and Business Solutions compiles your credit reporting data from credible sources and creates a credit file, which will reflect to your personal credit history, including your FICO score. Through Equifax, you will be able to monitor your entire credit history and check for any inaccurate entries.

Realizing the need for an accurate and free-of-fraud credit reporting, Equifax is now offering online credit report services which have an easy and immediate access to 3 nationwide credit reports, customer care for any inaccurate credit data on your report, and daily monitoring of 3 credit reports with alerts for any changes that must be done.

With Equifax Personal and Business Solutions, your good credit score report is in good hands.

Tips to Check and Improve Your Credit Score

You're in your home watching your favorite television show. Since you're enjoying it too much, you run out of snacks. So you put on a jacket, and scramble your way outdoors to go to the nearest store. When suddenly you stop and walk your way back towards your house. What could be the reason behind this?

Well, it's quite simple. You can't proceed to the store because you haven't paid your debt. If you're always like this, there is a big chance that you can't handle bigger debts. And with the overabundance of people incurring debts everyday, they are looking for quick and easy ways to improve their credit scores.

Credit scores helps in building a good credit history, so if you constantly leave your bills unpaid, and don’t take your credit transactions seriously, your credit score will eventually go down.

If you have credit, you must be responsible enough to repay what you owe, otherwise this will reflect in your credit report. Suppose now you have a low credit score; its time that you start improving or cleaning it up little by little. How will you do it? Consider the following tips:

1. Review your credit report on an annual basis. There are three credit-reporting agencies, so you must get a copy of your credit report from each agency. Check for any mistakes, and if you do find some, you must have it corrected. This will usually take about three months before the change can take effect. If you are planning to apply for a loan, you must do this ahead of time.

2. Start paying all your dues on time, and if you can afford it, always pay the bill in full. Don’t leave balances because this will greatly help in improving your score.

3. If you have a credit card, you may want to start paying your remaining balance until you've reached about 25% of the credit limit.

4. Credit insuring is important if you want to purchase a car. Having a car nowadays is important especially if you need to travel every now and then. Car dealers can help in arranging your finances. This is called repossession insurance. Though it can be expensive, it is one way to improve your credit score and secure vehicle loan.

5. Start applying for account overdraft if you have a checking account. This means that you can issue a check more than what you actually have in your checking account without getting extra charges. The excess amount will be reflected in your monthly bill. Banks report to credit agencies, so make sure that you pay your debt on time to have your credit score improved.

6. Join clubs which charges annual fees and those that report to credit bureaus. Just make sure that you meet all the club's requirements. Some clubs arrange for financing, and if you receive credit, pay your debt on time. This is also one way to improve your credit score.

If you follow the tips mentioned, you're on your way to repairing your credit report. Your credit score is your only way to getting finance on credit, so make sure that once you've improved it, stay on the right track and avoid getting bad debt again.

Maintaining a high credit score entails great responsibility and discipline. Start now, while you still have room for improvement.