Increase Your Buying Power - Understand Your Credit Scores

Your credit score is a numerical representation of your statistical likelihood to repay credit that is extended to you.  Scores range from 350-850.  Your score is a "snapshot" of a specific moment and can change with new actions and the passage of time.

Until recently, the secrets of credit score calculation have been very closely guarded.  We can now estimate how your score is put together.

Payment History = 35%

· Do you pay your credit on time?

· Length of positive credit history

· Severity and quantity of delinquencies

Amount Owed = 30%

· Quantity of credit accounts-too many credit cards with balances can lower a score

Length of Credit History = 15%

· The longer the history, the better

· How long have your credit accounts been established?

· How long has it been since you used certain accounts?

New Credit = 10%

· Research shows that opening several credit accounts in a short period of time does represent greater risk  - especially for people who do not have a long established credit history.

Types of Credit in Use (Healthy Mix) = 10%

· 2 installment loans

· 3 revolving accounts with balances

· Balances on revolving debt below 30% of the high credit

· No collection accounts

· No public records

· No foreclosures

· No late payments

Tipping the Scales in Your Favor

· Pay all of your bills on time or early.  Even a 30 day late on a small credit card can have a significant impact on your scores.

· Don't co-sign loans  -  their late payments are yours!

· Don't close old revolving accounts no longer in use.

· Don't open new accounts unless absolutely necessary (inquiries may or may not affect your score depending on the rest of your credit history).

· Report fraud immediately.  If you find yourself the victim of fraud, immediately contact the credit bureaus, your credit card companies, banks, and the FTC at www.ftc.gov.

· Monitor your credit.  Order a copy of your credit report once a year from www.annualcreditreport.com.

· If you are planning to refinance or buy a home, do not make any major purchases or run up the balances on your credit cards prior to the transaction.