| You know that the information found in your credit | | | | - 10% New Credit Obtained -- Have you been on a |
| report determines your credit score, but how do they | | | | shopping frenzy? |
| turn the information into a number? | | | | Your payment history looks at the last seven years of |
| Every time you apply to borrow money from a lender, | | | | your accounts. Have you paid your bills on time each |
| be it a loan or a credit card, your credit report and | | | | month? The history will include open and closed |
| score will be scrutinized. This score often dictates | | | | accounts, negative accounts and collections and any |
| whether or not you will be approved for credit. | | | | delinquent accounts you may have. |
| Credit scores range from 340 to 850, and are used to | | | | The amount owed looks at how much credit you have |
| determine whether or not it is likely that you will pay | | | | and how much you owe your lenders. You want to |
| back the loan. The lower the score, the higher the risk | | | | show that you have little revolving debt owed when |
| that you will not pay back the loan. For example, a | | | | compared to how much you have available. This |
| borrower with a score of 439 is less likely to pay back | | | | shows how frequently you pay off your debts and |
| a loan than a borrower with a score of 712. | | | | how much is building over time. Lenders don't want to |
| Before you apply for a loan, you should have an idea | | | | see borrowers that are maxed out on all their cards. |
| of what your credit score is. At least once a year you | | | | This makes you a risk. |
| should review your credit report to make sure it is | | | | The length of your credit history shows how long since |
| accurate. What is found on your report will reflect in | | | | you have opened an account. A long credit history |
| your score. | | | | shows that you continue to make your payments and |
| The three credit bureaus -- Equifax, TransUnion and | | | | be a good borrower. |
| Experian -- all use different computer software that | | | | The types of credit you use reflects on what type of |
| takes the information in your credit report and | | | | borrower you are. There are mortgages, credit cards, |
| generates it into a numerical score. Each bureau may | | | | auto loans, secured loans and subprime loans. You |
| report a different score, which can range by as much | | | | should have several different types of credit, not all |
| as 100 points. For example, my husband actually is one | | | | credit cards. |
| of those people who has a 80 point spread between | | | | In the past six months, how much new credit have you |
| his highest and lowest score. Others, like myself, will | | | | obtained? If you have been on a shopping spree, it will |
| have three scores that are all within a point or two of | | | | lower your credit score. |
| each other. It is just one of life's mysteries. | | | | Take steps to increase your credit score. Look at |
| Your credit score is calculated using the following | | | | what will have the most impact -- your payment |
| information from your credit report: | | | | history. Start paying on time, every single month. Take |
| - 35% Payment History -- Do you pay on time, every | | | | care of any delinquencies and past due accounts. |
| time? | | | | Then start paying down your debt as much as |
| - 30% Amount Owed -- How much do you owe your | | | | possible. Work on a longer credit history, which simply |
| lenders? | | | | takes time. Make sure that you have a balanced |
| - 15% Length of Credit History -- How long have you | | | | amount of secured and unsecured debt. Finally, try to |
| been a borrower? | | | | space out your financing so that you aren't obtaining all |
| - 10% Types of Credit -- Do you only have credit | | | | of your new credit at once. |
| cards? | | | | |