In today's credit driven society, it is imperative that we begin to understand and leverage one of our most personal assets, "Credit."  In short, your personal credit score is a key component used to determine if you are a good risk to lending institutions.  Moreover, it will determine how much you will pay for items you finance, including a new home, an auto, and even insurance premiums for these items.  However, credit is also a factor in determining your career options, and the ability one will have in pursuing career aspirations in any kind of financial service related field.   In this article, you will find a general overview of how your credit score is determined, as well as, a few things you can do today to begin increasing your credit score.

                Let's start with the basics.  There are three major credit institutions: Experian, Equifax, and Trans Union.  These three bureaus, as they are commonly referred to, compile your credit score from various creditors that you do business.  Credit scores range from 300-850.  In general, the higher your credit scores the better.  Credit scores below 600 will generally make it more difficult for you obtain credit with decent interest rates, while credit scores above 720 are welcome just about anywhere.

               So, how is your credit score configured?  I'm glad you asked.

There are 5 categories that lenders look at to determine if you are a good risk.

1. Payment History:  Paying your bills on time accounts for 35% of your credit score.
2. Amounts Owed:  30% of your credit score is determined by how much you actually owe in relationship to the limit the creditor has given you.
3. Length of Credit History: 15% of your credit score is determined by long you have had a credit profile.
4. Type of Credit: 10% of your credit score is based on new credit that you have applied for.
5. Types of Credit Used: 10 % of your credit score is based on the types of credit that you use, the better the mix of credit used, the better your credit score. Ex. Someone with a credit card, an auto loan, and a mortgage, will generally have a higher score than someone who only has 2 credit cards. 

Hot Tips To Increase Your Credit Score!

                So many times I am asked, "If I have had credit challenges in the past, what can I do to boost my score now?"  Here are a few things that you can begin doing today to improve your credit score.

1. Create a budget and put in on your refrigerator.  There is a study that shows you are 50% more likely to accomplish a goal if you just write it down.  Your budget is like your roadmap.  It helps you see exactly what you have coming in and what you have going out.  It also can you determine if there are areas in your life where you are splurging excessively.  This extra money can be used in the following steps.  If you need a simple easy to use form, simply e-mail me and I can send it over to you. 
2. Get a copy of your credit report.  You can visit http://www.annualcreditreport.com/ for one free copy of your credit report annually.  I typically suggest that my clients do this at the beginning of each year to make sure that their identity has not been tampered with and to make sure everything on the report is accurate.  Also, once you have a copy of your report you can begin to put a plan together to eliminate your debt.
3. Because 35% of your credit score is based on making timely payments, please do so.  This is critical.  If you lose a job, or have some other extenuating circumstance, call your creditors, many times they will make arrangements with you and will not report you as being delinquent unless you don't keep up with the new arrangements that have been put in place. 
4. Keep your balances less than 30% of the credit limit that you have been granted, ie.  If you have a credit card with a limit of $1,000, keeping the balance at less than $300 will optimize your credit score.
5. Don't close old, unused accounts, unless you have a lot of them.  The older the accounts are the more stable your credit profile looks and this also adds to your credit score.  Typically you don't want to have more than 3 credit cards as a rule of thumb.  Also, new credit accounts under a year will typically hurt your score and accounts older than 2 years will boost it.
6. Finally, dispute any inaccuracies.  At http://www.annualcreditreport.com/  you can also dispute inaccuracies that you find right online.  Typically companies have 45-60 days to affirm any disputes in writing or they must by law take it off of your report.  Inaccuracies can consist of old address', old employers, as well as creditors that have been paid off, or creditors who reflect the wrong amounts old.  Remember, if they can't prove it, it must be taken off. 

Your credit is one of your most precious assets.  If you have had credit challenges in the past, it is never too late to begin changing your situation.  The life you live today is based on the choices you made yesterday.  So, please, make great choices today so you can live great tomorrow.  I hope you have found this information to be useful.  If you have any other questions or comments, please feel free to contact me at cmarlow@panamlending.com or visit my website at http://www.ceceliaknowsmortgages.com/ 

Cecelia Marlow

Senior Mortgage Consutlant

PanAmerican Mortgage, LLC