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Whether or not you receive a loan and what interest rate you get on your credit card may be determined by something called a FICO score. Named for Fair, Isaac & Co., a California-based company that developed the credit score, the FICO score is the most widely used scoring method to determine credit worthiness.
Scores range from approximately 300 to 800 and are provided to lenders by the three credit bureaus, Equifax, Experian, and TransUnion. You also have access to your FICO scores, but will be charged a fee by each credit agency providing your report.
According to Fair Isaac, the credit scores of the American public are divided as follows:
• 499 and below 1 percent
• 500-549 5 percent
• 550-599 7 percent
• 600-649 11 percent
• 650-699 16 percent
• 700-749 20 percent
• 749-799 29 percent
• 800 and above 11 percent
A score of 720 or higher will probably get you the best interest rates on a home mortgage. Your credit card company looks at your credit score to decide whether or not to raise your credit limit or charge you a higher interest rate. The higher your credit score, the better you look to lenders and the lower your interest rates.
Raising your FICO score can make a big difference to your wallet. Some basic actions you can take to improve your score include paying your bills on time, lowering your account balances, and not taking on new debt.
Around the time you intend to apply for a loan, several factors can decrease your FICO score and, therefore, your ability to qualify for credit and low interest rates. First, order copies of your credit report from all three bureaus and correct any errors you find. Be sure that balances you have paid down are reflected on the report, along with closed accounts and settlements.
It's important to get your credit scores from all three credit reporting agencies. Each bureau may have different information about you as reported by retailers and creditors. Clerical errors at a particular agency may also result in a varying score. Lenders often look at all three FICO scores, and rather than using the average of the three scores, they may use the middle score to determine your credit worthiness. Finding out what this middle score is and doing what you can to raise it is to your advantage.
Second, pay what you can on your debt rather than moving it around. Consolidating your credit card debt may be tempting, but it could lower your FICO score. Here's why: keeping your account balances between 25% and 50% of your available credit, signals a responsible borrower. For example, if you have a credit card with a $2000 limit, you should keep your debt below $1000. The ratio of your credit card balance to your credit card limit will increase if you pile all of your debt into a couple of accounts, rather than keeping it spread out over several.
If you have three credit cards with limits of $2000 each, and you owe a balance of $1500 on all three combined, you have a total credit limit of $6000 on which you owe a balance of $1500. That's a debt to credit limit ratio of 25%. But if you consolidate your $1500 debt into one card with a $2000 limit, you increase your debt to credit limit ratio to 75%, an unfavorable factor in your overall credit score. For this reason, the best solution is to simply pay off your existing cards as quickly as possible.
Also important in making the most of your FICO score near loan time is keeping unused accounts open, for the same reason as listed above. Your debt to credit limit ratio will rise drastically if you close your unused accounts. Wait until you have secured your loan to trim inactive accounts from your credit report. Also refrain from applying for any new accounts during this time.
Paying off your debt in a timely manner, building a solid credit history over a lengthy period of time, and erasing errors from your credit reports can all help you make the most of your FICO score and, in the end, make the most of your money.
Resources:
Equifax 800 525-6285 Experian 888 397-3742 TransUnion 800 680-7298
Applicant Screening
It happens more frequently than you might think. People spend a lot of time and money getting their sites ranked highly in the search engines, but give little or no attention to converting their visitors into paying customers. What's their logic? From what copywriting prospects tell me, "I wanted to get my rankings in place before working on my conversions."
It may look as though I'm sitting firmly on the fence; however, I don't think SEO and conversions are separate entities. I believe you need to work on them together. Let me tell you why from a copywriting and marketing standpoint.
People mistakenly think search engine optimization is the one-step process of getting ranked highly on search engines. You "do" SEO and when you're finished *poof* your site is ranked highly. In reality, SEO has numerous steps, all of which intertwine with the foundation of your marketing plan. For instance, if you were creating an online marketing plan for a new site you wanted to launch, what would the process include? Certainly there are numerous steps, but let's focus on the three below for now.
> > > Creating An Attractive, User-Friendly Design
A recent study by MarketingExperiments.com found that using eight particular elements in your site design can improve conversions by more than 70%. You would want a design that instills trust and confidence while reducing anxiety.
> > > Organizing An Effective Navigation Structure
Obviously, you want it to be as easy as possible for visitors to find what they're looking for. If they aren't able to navigate the site quickly, they'll get frustrated and leave.
> > > Writing Persuasive Copy That Informs and Sells
Just having words on your pages isn't enough to connect with your visitors. You want specific copywriting about each product or service that entices, explains, convinces and converts.
Amazingly, these same three steps are fundamental to developing a solid search engine optimization strategy. So what's the problem? If you complete the steps with SEO tunnel vision - without giving any thought to your visitors along the way -- you may be doomed to repeat everything you've already finished. Here's why:
> > > Creating An Attractive, User-Friendly Design
Many times, sites designed strictly to rank highly in the engines neglect the design process. You can have a site that's at the top of the search engine results pages (SERPs) and gets a ton of traffic, but causes visitors to immediately click away due to lack of trust. If this is the case, you'll need to change some or all of your design elements, which could possibly have a bearing on your rankings.
> > > Organizing An Effective Navigation Structure
I've read about companies who develop navigational structures specifically for the engines. They tell their clients to avoid cross-linking between certain pages or areas of the site so as not to "confuse" the search engines. Whether it confuses the search engines or not, if you want to make more sales, cross-linking and up-selling are excellent strategies that make it easier for your visitors to find -- and buy -- what they need. If you're ranking highly but not making sales, it may mean you need to radically improve your navigation, which could change your rankings.
> > > Writing Persuasive Copy That Informs and Sells
Keyword-stuffed, third-grade-level copy that is repetitive and boring won't make sales. If you've slapped up any old copy thinking you would improve it later, you're probably in for a rude awakening. Copywriting is a pivotal element in search engine optimization. Unless you're having great success with a massive linking campaign, copywriting will play a major part in your rankings. Changing copy can (and almost always will) cause either a negative or positive change in positioning. Oftentimes, pages fall, then return with higher placement -- but not always. If your copy is preventing your site from converting, it needs to be changed immediately even if that means a temporary drop in positioning.
The search engines do not make your site successful. The search engines don't buy anything from you. All they do is send traffic your way. Although there is no discounting the value of free traffic from the engines, you can get traffic from countless other online and offline sources. Your site is what makes you money and it needs to be developed for your visitors. But by focusing strictly on SEO, it is highly likely you'll be forced to change most of what you've built in order to improve conversions later on. That means spending more time and money on something that could have been turning a profit by now.