| Years ago your credit score was a big secret, known | | | | you've already repaid. Closing accounts with a zero |
| only to a select few such as your mortgage and credit | | | | balance does not generally improve your score in this |
| card companies. In 2000, Fair, Isaac Co., the major | | | | area. The key to a higher score: Keep your credit card |
| supplier of credit scoring software, announced they | | | | balances low. |
| would begin sharing credit scores, also known as FICO | | | | LENGTH OF ESTABLISHED CREDIT (15 percent) |
| scores, with consumers. | | | | The longer you've had credit accounts the higher you |
| What is a credit score? A credit score is a tool used | | | | will score in this area. The age of your oldest account |
| by credit grantors to determine your ability to repay | | | | and the average age of all your accounts are used in |
| your debts. The information in your credit report is | | | | determining your score. Old accounts that have gone |
| compared and evaluated against tens of millions of | | | | unused are also considered. The key to a higher score: |
| other consumer credit reports which gives you a credit | | | | Establish good credit and keep accounts active. |
| score or number ranging from 350 (highest credit risk) | | | | APPLICATIONS FOR NEW CREDIT (10 percent) |
| up to 800 (lowest credit risk). A higher score means | | | | Opening multiple credit accounts within a short period |
| you are less likely to make late payments or default | | | | of time represents a greater risk of becoming |
| on the credit extended to you. Your credit score will | | | | overextended. Each time you apply for credit an |
| change as the information in your credit report | | | | inquiry is made into your credit history and these |
| changes over time. | | | | inquiries show up in your credit report. A high number |
| Following is a short overview of the five major | | | | of credit inquiries will lower your score. |
| categories of credit information that are used in | | | | Some inquiries are not considered in your score. These |
| determining your credit score and guidelines for scoring | | | | include: requests by you for your credit report, inquiries |
| higher. | | | | from companies for pre-approved offers or |
| PAYMENT HISTORY (35 percent) | | | | companies that already do business with you, along |
| Paying your current bills on time is the single most | | | | with inquiries from potential employers. Some requests |
| important factor in obtaining a high credit score. This | | | | for credit are treated as a single inquiry especially |
| category includes credit cards like Visa and | | | | when you are shopping for the best loan rate. The key |
| MasterCard, retail accounts, installment loans such as | | | | to a higher score: Only apply for and open new credit |
| those for a car or education, loans from finance | | | | accounts when you need them. |
| companies, and home mortgages. Also included in this | | | | YOUR CREDIT MIX (10 percent) |
| category are matters of public record such as | | | | This category examines the types of credit accounts |
| bankruptcies, liens, wage garnishments, and collection | | | | you have and how many of each. Can a person have |
| accounts. The key to a higher score: Pay your bills on | | | | too many accounts? Yes and no. It really depends on |
| time! | | | | whether you have an established credit history or no |
| HOW MUCH DEBT YOU CARRY (30 percent) | | | | credit history at all. The key to a higher score: Open |
| This category considers the amount of debt you owe | | | | credit accounts only if you intend to use them. |
| on your various credit accounts. If you've "maxed out" | | | | Don't despair if you have a low score or are just |
| your available credit, this could indicate that you are | | | | beginning to establish credit. Your credit score will |
| overextended financially and won't be able to make | | | | change for better or worse depending on how well |
| your payments on time or repay your debts | | | | you understand and use these five keys to your |
| completely. This category also examines how many of | | | | advantage in planning your financial future. |
| your accounts carry balances and how much money | | | | |