Your Credit Score

Improving, maintaining, & protecting your credit score allows you to save literally thousands of dollars a year by paying lower interest rates, lower fees, & avoiding identity theft. Your credit score is how lenders score you and qualify you for certain loan programs that they offer. Of course the best rates & loan programs are designed for the people with excellent credit.

So, What affects my Credit Score?

Here is a short list of the factors that affect your credit score:

Your payment history - The reason credit agencies look at payment history as the number one factor in determining your credit score is it gives them a look into how you have managed your credit in the past. Delinquent payments and collections can have a major negative impact on your credit score.
Amounts owed - The second largest factor in determining your credit score is the amount you owe. It is not as complicated as googles logarithm, but it can even take into account lack of amounts owed. I know that just boggles my mind. They look at amounts owed in relation to specific types of credit, in relation to available balance, as well as number of accounts.
Length of credit history - This one is fairly simple... Ohh, but wait, we can make even the simplest thing complicated, says the credit agencies as they... oh nevermind, you get the picture. How long have you had an account, how long you've had certain types of accounts, and have you been using them? This is one of the reason's you don't go paying off all of your credit card bills and canceling them. (OK, yes I did this) Paying off your bills... is good. But, you want to maintain some of your credit relationships. Credit reporting agencies look for at least three tradelines for a valid score.
How often you apply for and get credit - Have you recently opened a lot of accounts? That can negatively affect your credit score. They also look at how many inquiries you have had recently.
Your credit mix - The mix of different types of credit you use like; credit cards, retail accounts, mortgage, installment, & consumer finance accounts.

How does having a low Credit Score effect me?

You lose money - Lower scores can mean higher rates when getting a home, car, or personal loan. This adds up to more money out of your pocket every month!
Getting denied for credit - Lenders use credit scores to determine eligibilty for lending money. Most loan programs have a minimum credit score for consideration. If you are below this threshold the likelyhood of getting approved is very narrow.
Longer approval periods - When you have excellent credit you will sometimes get instant approval on different types of loans. Ocasionally not having to even provide certain types of documentation that would normally be necessary.

What can I do to Improve My Credit Score? - Good Question, we're glad you asked!

First things first... Like anytime you want to get from point A to point B, you need to know where both points are.

Know your credit score and what is on your credit - Knowing your credit score allows you to gage what is working and how much you've improved your credit. Knowing what is on your credit will allow you to see what is affecting your credit, so you don't make that mistake again. You should Get All 3 FICO Scores and Credit Reports! This will allow you to see what is on each one, because very rarely do they all match. You can also monitor your credit score monthly and receive updates when it changes or when a credit inquiry is made - Get Equifax Score Watch Now!
Pay your bills on time - The more history of on time bill payment the better your credit score. Remember this is the number one factor credit reporting agencies look at. (Note: Paying off a collection account doesn't remove it from your credit report it will stay on for 7 years)
Dispute!!! - Once you've ordered all three of your credit reports Dispute!!! Did I say it loud enough? All of the credit bureaus have the option to dispute inaccuracies on your credit report. When you dispute a tradeline they have to verify it with the creditor.
Pay down amounts owed - Start with higher interest rate revolving credit like credit cards, and don't cancel them all once you've paid them down.
Don't apply for credit frivously - Only apply for new credit if it is a necessity. Getting 10% off at the Gap is not a necessity, just in case you weren't sure.
Maintain your good credit history - Hold onto accounts you have had for a long time as it shows you have a good standing long-term relationship with that creditor.

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