Credit Rating Scores

Credit Rating Scores

Why do credit ratings play such an essential role in our everyday lives? credit rating scores

Credit ratings are essential because it indicates how likely an individual, a business, a city, a county, a state, or even a country is able to repay a debt. Each one of these entities has a credit rating and depending on positive or negative factors a rating can be upgraded or downgraded.

For example, the U.S. had always maintained a top tier AAA credit rating but recently one of the major credit-rating agencies, Standard & Poor’s, downgraded our country’s credit rating for the first time.

As a result America’s cost of borrowing increased by billions of dollars per year, which inevitably impacts consumers with higher interest rates and borrowing costs.

It’s no secret that failing to address our long-term debt triggered America’s downgrade according to S&P. While our country still has a very strong AA+ credit rating, this historic move has impacted our country significantly.

As consumers we have our own personal credit ratings to be concerned about. A downgrade of our personal credit scores can impact our lives tremendously.

In particular, FICO® scores are the most widely used credit ratings in the world. It is recognized as the standard measure of consumer credit risk.

You have one score from each of the major consumer credit agencies. This tiny three digit number ranges from 300-850 with 725+ considered the starting point for excellent credit risks.

Your score is calculated each time it is requested; either by you or a lender. And each time it is calculated it’s taking the information that is on your credit report at that time. So any negative changes to your credit reports can trigger a downgrade.

How much your score changes depends by a variety of factors such as missing a payment, incurring excessive debt, filing for bankruptcy, excessive inquiries, etc.

Here are some examples of how a credit rating downgrade can impact your life:

  1. Expect to pay 20-30% more in premiums for car insurance.
  2. Interest rates for personal loans can be between 17-26%.
  3. Over 70% of major companies will check your credit rating as part of employment screening. A downgrade can impact your chances of obtaining a job.
  4. It can prevent you from obtaining housing since many rental property owners check credit ratings during the tenant screening process.
  5. You may be required to pay a deposit when opening an account for utility services.
  6. It can prevent you from getting a student loan.
  7. With a credit rating downgrade you may be denied for a regular cell phone contract and be required to use a pay-as-you-go agreement.

As you can see getting your credit scores downgraded effects you in more ways than one. However, there are steps you can take to recover and improve your scores.

First, get a copy of your free annual credit reports from each of the major consumer credit agencies. Secondly, review your reports and initiate a dispute if you uncover any inaccuracies.

Finally, begin rebuilding your credit reports and review the booklet “Understanding Your FICO® score” to get a better knowledge of the credit scoring process.

Don’t get discouraged because you can reclaim your solid credit ratings as long as you take the necessary steps and put the time and energy required to making it happen.

Business Credit for Small Business: A Shocking Reality During Tough Economic Times Source:

In the past during good economic times you may have become accustom to using personal credit cards to finance purchases, equipment, and even payments to suppliers or vendors when starting and operating your business.

Unfortunately times have changed for business credit for small business and what has become a shocking reality to many are the ramifications of what the co mingling of personal credit files for business financing has resulted in.

Many small business owners who have followed the traditional route of personally guaranteeing each and every credit card, business credit line, or loan for business have come to realize that they have put their personal assets and family at risk!

The single greatest challenge during these tough economic times facing small business in America is adapting to change. Less than ten percent of business owners in America know how to truly separate their personal credit from business credit let alone understand how to set up a business credit profile an establish a good rating.

So what is business credit?

It’s the ability to obtain financing under the name of your business entity without using your personal credit or personal guarantee. Business credit should be separate and based on the corporation’s credit worthiness not yours! Recently Entrepreneur Magazine was quoted as saying “You should differentiate your personal credit from your business credit.”

Credit Union vs. Bank

I read an article about banks and fees and I thought to myself “My my look at those snakes scramble!”

Banks are scrambling to replace billions of dollars in revenue that will be lost due to the new federal regulations on overdraft charges and debit cards.

Did you know that there are close to fifty fees that banks can charge its customers?

For example, banks generate substantial revenues from interchange fees it charges to retailers for debit transactions. These fees are something that customers never really paid attention to because the fees were imposed on the retailer.

But with the new regulations, the fees banks can charge for retailers will reduce from 44 cents to a cap of only 24 cents.

As a result banks will lose billions of dollars in revenues every time a customer swipes a card. With lost revenues banks will focus on ways to recapture those monies in order to satisfy its shareholders.

It’s important to realize that banks are for-profit financial institutions, owned by shareholders, not customers of the bank. Its primary goal is to generate profits which are returned to its shareholders in the form of dividends.

In order to make up for those lost revenues banks are trying to introduce new fees at the expense of its customers.

For example, Bank of America recently tried to impose a $5 monthly fee for customers who use their debit cards. But with the entire backlash all across the country and thousands fleeing to credit unions it recently decided to drop the debit card fees and abandon that idea.

Credit unions have become a safe haven for many consumers because it is member-owned and member operated. It is a collaborative, not-for-profit financial institution formed to supply credit to its members who are also its customers.

The chart below shows a direct comparison between credit unions and banks:

Credit Unions Banks
Not-for-profit Profit-oriented
Returns profits to members with lower loan rates, higher savings rates, and free or low-cost services. Returns profits to shareholders
Each depositor is a member with share of ownership. Customers have no ownership in the corporation.
Members elect a volunteer Board of Directors Controlled by shareholders and paid officials
Member-service driven Profit-driven
Federally insured by the National Credit Union Administration or a private insurer. Are federally insured by the FDIC
Can serve only those people within their field of membership. Can serve anyone in the general public.

Credit unions are such an attractive option because its first priority is to serve the needs of its members rather than to make a profit for shareholders. Because of this focus it is able to keep interest rates on deposits higher, and loan rates and fees lower.

As a result credit union members on a national scale save $6.3 billion a year by using a credit union instead of a bank.

Did you know that two-thirds of big banks have eliminated free checking?

A movement has begun encouraging consumers to transfer money away from those mega-banks toward credit unions. Despite the fact that major banks such as Wells Fargo and Chase have also suspended its pilot debit card fee programs the momentum clearly hasn’t stopped.

In the past month, traffic to NAFCU’s credit union locator was up 350 percent, according to the Washington Post.

While banks will continue to introduce new types of fees to recoup loss revenues, credit unions are still preserving its low costs and low rates causing customers to say “Hasta La Vista” to their banks.

Credit Myth #3


  • It is impossible to get a bankruptcy off.


TRUTH: Bankruptcies come off just like any other derogatory that is incorrectly reported, obsolete, erroneous, misleading, incomplete, or that cannot be verified. Remember, the nature of the item has nothing to do with its removal under the Fair Credit Reporting Act.  The credit reporting agencies never contact the bankruptcy courts directly, they have account executives that go to gather the information for them. Not only is this information is rarely properly verified but the agencies also won’t ever have the proper documentation to prove how they verified this account.

Credit Myth #2


  • The credit agencies are required by law to keep derogatory items on your credit report for 7 to 10 years.


There is no law that the credit agencies report anything on you at all. Just the opposite is true! Credit Agencies are required by law to automatically remove all derogatory items older than 7 years or in the case of a bankruptcy, 10 years.


Why Good Credit Matters?

Society is becoming increasingly dependent on using credit to make purchases and decisions. These days, good credit is used for more than just getting a credit card or a loan. More and more businesses are making the case that you must have good credit before they extend products or services to you.

Many people have dreams of starting their own business. Most business startups require a sizable amount of cash that you might not have available. In that case, you’ll need to obtain a small business loan. Among other things, you need to have good credit to qualify for the business loan.