Interesting...A little education for all of you out there on how your FICO score is determined.
Read an excerpt from Get Rich Slowly, a blog that I follow:
Quick overview of credit scores and home mortgages
Let’s review the anatomy of a credit score. There are a few categories that determine your final number. All you Gwynns out there, lend a quick ear…
A FICO score serves as a quick reference guide for lenders to determine the risk level for them to give money. It’s a number between 300-850, the higher the better.
Lenders take your credit score and a few other pieces of information into consideration, such as age and salary, and make a decision about how your loan will play out. In short, a high score will be less risk, therefore a lower APR and less overall cost to the borrower.
Here’s a chart comparing APRs and total cost for a 30-year fixed mortgage on a $500,000 house:
|Credit Score||APR||Including interest, your house will cost…|
--Taken from www.getrichslowly.org
Bottom line: the only way to build a good FICO is to borrow money (regularly) and pay it back. At the top of my game, I had a 769 FICO score and around $50,000 in open lines of credit, which (by the way) I was sooo proud of.
However my score was not an accurate measure of how financial sound I was. It was just my "I love debt" score...nowadays I count my financial security in actual cash and real assets. That is, I let my FICO score take care of itself...the only reason I pull my credit report today is to make sure its accurate.
You think rich people give a flip about their credit score? We want to be RICH don't we?
One day I hope to be more like Gwynn in this story, she rocks!
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