Question

1. Use the estimator in the myfico website to estimate the FICO credit score for the following person:

-Never had a budget. Not sure where his money is going. Regularly uses credit cards to pay for food, entertainment, books, etc.

• With 3 credit cards (that his parents cosigned on) has run up a total of $3,500 in debt. Paying minimum off every month and bumping up against $4,000 total credit limit. Average interest rate on credit cards is 23.2%.
• Loses track of bills and pays about ½ on time. Angry about the late fees and penalties and higher interest rates that keep appearing on his bills.
• Motivated now to be more financially responsible since he saw how difficult life has become for a friend of his who recently graduated with poor money habits.

===============================================================================================================================================

1. Simulated Credit score:___________, which is _______ (excellent, good, poor, etc) (1 pt.)
2. What are three things that Sam could do to improve his credit score? Remember, do not guess, you have a simulator to help you. (1 pt.)

Answer 1

The credit score range 300 to 620 with poor rating. A bad credit score is a FICO score in the range of 300 to 620. (FICO stands for Fair Isaac Corporation, the company that originated the most widely used credit scoring system.) Some score charts subdivide that range, calling “bad credit” a score of 300 to 550 and “subprime credit” a score of 550 to 620. Regardless of labeling, you’ll have trouble obtaining a good interest rate or getting a loan at all with a credit score of 620 or lower. In contrast, an excellent credit score falls in the 740 to 850 range.

Improve credit score:

1. Pay Your Bills on Time.
2. Get Credit for Making Utility and Cell Phone Payments on Time.
3. Pay off Debt and Keep Balances Low on Credit Cards and Other Revolving Credit.
4. Apply for and Open New Credit Accounts Only as Needed.
5. Don't Close Unused Credit Cards.

answered by: anonymous