Understand Credit Scores

Credit scores are used by creditors and lenders to determine whether they will lend you money and what terms (interest rate, how much, etc.) you will be offered. Boosting your credit score will result in considerable savings—better loan terms and lower interest rates. Interest-only and other sub-prime mortgage loans—those with less than stellar terms sold to borrowers with low credit scores or not enough money—have resulted in foreclosure for many homeowners when they couldn’t afford the hiked payments.

California Banks to Offer Zero Interest Loans to State Workers Who Qualify

When the republican governor of California, was elected, he had promised that he would cut State spending and help private business grow and it seems that he was able to do just that but apparently not to benefit of the residents of California but the California’s banks and credit unions.

According to an article on Bloomberg, Banks and Credit Unions in California will now offer zero interest loans to over 200,000 State employees whose salaries maybe reduced to minimum wage.

“We’re trying to show our support for our state-employee members,” claims Golden 1 Credit Union’s Donna A Bland.

But are they really? Anyone knows that by reducing one person’s employee and offering them installment loan, even a zero interest one, only means trouble. It keeps them under further debt, takes away their ability of paying back the loan or living paycheck to paycheck, which makes them more vulnerable financially for more loans. And when they run out of 0 interest loans, then they start taking interest based loans and even high interest loans including short and long term loans such as payday loans.

What’s a Credit Score?

A credit score is a mathematical computation that results in a number that’s used to help lenders determine how likely it is that you’ll pay back a loan. Your score is based on how you’ve handled paying back loans in the past. The higher your score, the less risk you pose of paying late or defaulting and the lower your interest rate. Hence, a higher credit score makes a loan less expensive for you.

The most frequently used credit score is the FICO score, which ranges from 300-850. They are created using software developed by Fair Isaacs Corporation. Most people score in the 600-700 range. Scores above 700 are desirable. Scores below 600 are considered a financial risk to lenders and creditors. While scores may vary among bureaus, they generally represent the same credit risk.

FICO scores are based on five factors. The level of importance of each factor varies by credit profile, and your profile changes over time. In general, they’re weighted as follows:
Payment history (35%)
Amounts owed (30%)
How long you’ve have credit (15%)
Amount of new credit (10%)
Types of credit used (10%)