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What Does a Fair Credit Score Mean?

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Every US citizen who has used lending is assigned a score by the Fair Isaac Corporation, or FICO. One of the categories on its scale is known as “fair credit”. It encompasses the 580-669 range. If you look at the breakdown, you will see that this level is inferior to “good credit”. Yes, a fair total is not the best result. Why do consumers get it, and how can you upgrade their level?

Your score is a vital indicator. It is used by different types of institutions to compare applicants based on creditworthiness. You can be sure your total is considered by lenders, insurance companies, landlords, and recruiters. It affects many spheres of life, so a higher position on the FICO scale opens many doors.

What Does a Fair Credit Score Mean?

How Scores Work

Like VantageScore, the methodology is based on a scale from 300 to 850. This is broken down into several segments, with “very poor” and “fair” preceding “good”, “very good” and “exceptional”. Eight hundred is enough to access the best conditions and services. The assessment is based on the reports compiled by the nationwide bureaus.

According to the Experian bureau, around 17% of US citizens fall within the category. These consumers should improve their position to save money and become more trustworthy in the eyes of institutions. This may be achieved by repairing or rebuilding the score, depending on the accuracy of the reports.

Repair is based on formal disputes to remove false damaging information. Check the latest credit repair.com review on Credit Fixed to see how this works. Rebuilding implies working with different components of the FICO assessment, such as the size of total debt. The strategy depends on the goals — for example, you may need a higher credit score to buy a car.

Applicants from the “fair” category are viewed with suspicion. The level affects the conditions and accessibility of credit services, be it an auto loan, mortgage, or credit card. The lower your level in the hierarchy — the higher the interest rates. If you do get approval, borrowing is more expensive than for someone from the top.

Benefits of Better Scores

Rising in the system is important for your financial future. Improvement is attractive for millions of people. Here are some of the advantages.

  • The interest rates on different types of services will be lower, which means borrowing will get cheaper.
  • With lower rates come lower payments. Meeting the obligations every month will be easier.
  • You will unlock better conditions on cards, including zero interest, deals, and rewards.
  • Renting an apartment or house will be easier, as the landlords will perceive you as a more responsible tenant.

Why Scores Fall

As the total is based on the report, what exactly affects it? The FICO methodology considers five aspects of your borrowing behavior. Each of them has a specific influence on your status. Here is the breakdown:

  • prior payments (35%);
  • the overall amount owed (30%);
  • age of the records (15%);
  • new accounts (10%);
  • credit mix (10%).

Note that different assessment methods rely on different components, although FICO and VantageScore are quite similar. Most commonly, unfavorable totals are observed as a result of poor budgeting. For example:

  • You may have missed payments in the past. This is the most damaging type of information, as it defines the biggest chunk of the score. As a rule, lenders report late payments 30 days after the due date.
  • Eventually, failure to pay results in collections, defaults, bankruptcies, and civil judgments, which tarnish the total for 7 years (Chapter 7 bankruptcies linger for 10 years).
  • You may have used too much of your limits. Maximizing credit cards is a terrible idea, as it brings the utilization ratio to 100%. Meanwhile, experts recommend using no more than 10% of your total limits.
  • If you have little experience with credit, your history is very short.
  • Borrowers who use only one or two types of services have a poor credit mix. This factor, which is responsible for 10% of the result, reflects your ability to manage different types of obligations.
  • You may have acquired too much debt.
  • You may have submitted too many applications within a short period. Rate shopping is allowed, but requesting different types of lending has a negative effect, as it makes you look like someone desperate for cash.

What Does a Fair Credit Score Mean

How Can I Improve My Credit Score?

If your score has fallen unfairly, fix the reporting errors yourself or hire experts. Repair is based on the stipulations of The Fair Credit Reporting Act, which obliges the bureaus to remove any information they cannot verify. To open a dispute, you need to find evidence and make copies of the documents to back up your claim. A template is available on the website of The Consumer Financial Protection Bureau.

Alternatively, find a repair company in your state. The professionals will find inconsistencies in your records, prepare evidence and dispute them formally on your behalf. This saves time, as you do not have to navigate the laws or deal with formal correspondence. Every dispute letter launches an internal investigation that lasts for 30 days. If the bureau accepts the changes, you will get a copy of the amended report free of charge.

When the fair score is accurate, there is nothing to fix. Instead, look at your borrowing patterns to see which elements of FICO pull the total down. For example, you may need to lower utilization by paying off some balances, extending the limits, getting a new card, or becoming an authorized user. Gradually, your status will improve, unlocking better conditions for different types of services.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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