When it comes to borrowing money, most lenders will base their decision on your credit rating. This is calculated based on a number of factors such as your borrowing history and how timely your repayments are.
But what is a ‘normal’ credit rating, and what do you need to do to achieve one? Well, according to FICO, the company that calculates credit ratings, you are considered ‘normal’ if you:
1. Have 11 Credit Accounts
Although this might sound like a lot, it includes all your credit cards, store charge cards, bank cards, mortgages, loans and so on. Basically, anything where you have the ability to borrow money.
2. Haven’t Made Too Many Late Payments
The majority of ‘normal’ people have never been more than 30 days late making a repayment. You may also just sneak into the ‘normal’ category if you have been over 30 days late, but not more than 60. Anything over 60 and you’re unlikely to fit into this group.
3. Aren’t Using Too Much Credit
To be considered ‘normal’, you should keep your credit card borrowing to less than about $1,000. If you go over this, particularly for long periods of time, you are considered to be a higher risk borrower.
4. Have Access To Around $12,000
Add up all of your spending limits on all of your credit cards. If they come to around $12,000 then you’re considered ‘normal’, as this is an average level for most people. If you can borrow more, you’re considered to be better than average; less and you’re considered more risky.
5. Have Had The Same Credit Card For 13 Years
If you have a history that shows you have owned and used a credit card from the same company for a significant period of time then you have proven that you know how to use credit responsibly. It can often be a good idea to get a credit card even if you don’t use it, just to start building up your credit rating.
When comparing yourself against these criteria, you should remember that these are just the statistical averages, and not exact figures. You may not fit some of these measurements very well, and for some you might be completely out, but that doesn’t necessarily mean you won’t be considered a ‘normal’ risk borrower.
By: Paul G Watkins
About the Author:
Once a self-confessed spendaholic, Paul Watkins now works hard to control his own finances, and enjoys passing on the lessons he’s learned so that others can do the same. He also loves writing, and creating websites. Check out his latest site about small double beds which includes information about how a small sofa bed will help make the most of your available space.
