Getting students educated on the FICO credit scoring system is not a priority in the school system. Neither is it in almost all industries. The reasons for this can vary but the major one is that we are not provided with specifics on exactly how the scoring model works. This is done on purpose to protect the integrity of the scoring model.

It is frustrating sometimes but keep in mind that we do have an idea on most of the things that will help/hurt your score. Below is a graph to help explain what makes up your score.

Did you notice something? Maxing out your cards can be just as deadly as being late. Another item is that inquires make up 10% of your score. The inquires that hurt you are when a lender checks your credit to qualify you for a loan/service. However, the typical drop in your score is below 3 points.

Simply put:

• Make your payments on time 
• Try to keep balances on revolving debt (credit cards) below 50% and ideally 25%
• Keep at least 3 active loans or other credit file items on your report for at least 2 years to build your good payment history.
• Have a good mix of credit items: A home loan, car loan, & credit card are the best and varied 3 to have.
• Keep inquires to a minimum but when shopping for a home or car, you can do so in a short time period and several inquires will only count as one.  

Do go to AnnualCreditReport.com once a year for your free report from all 3 agencies. If you have mistakes there are ways to remove them. If you have items hurting your score, you can fix them. It is easier then you probably think!

Jeff Fullmer- Loan Officer and Credit Counselor