Financially Speaking
Renee Bailey
You and Your Credit Score
By: Alex Pettitt, Guest columnist
It's something that you are judged by in almost every facet of your life, it can make the difference between getting a job, mortgage or car. It's your Credit Score. Your Fair Isaac Score (FICO) is based on a multitude of factors that ranged from payment history to your annual income. FICOs range from 350-850 with the average person between 720-750. You can get a free credit report at www.annualcreditreport.com however, the sites will simply show your credit history and not you score. If you want your score, you'll have to pay $15 (this is generally a monthly charge so, make sure you cancel after you've seen your score) and it's probably good to look at on an annual basis.
How does one improve their Credit Score? Well believe it or not, it doesn't take a lot to improve your credit score. The easiest way is to make all of your payments on time. After six months of on time payments your credit score should start to increase. If you have term credit (ie mortgage & auto) it's best to make sure those payments are made on time and in my opinion automatic payments are the easiest way to make sure that your payments are being made. If you have revolving credit such as credit cards, the credit should revolve, this means when you get the bill, it should be at $0 when you pay it AND paid with cash not another credit card.
Now Home Equity Lines of Credit are tricky because they can be done on a term or revolving basis. If you have term loan, treat it as a regular mortgage and it'll be paid off over a 10-15 year period. If it's revolving, hopefully your spending the equity on improving your home or some investment that'll increase your net worth. Regardless once you've spent money on your investment, figure out a an amortization schedule to pay off your loan before maturity. As your Home Equity Line of Credit begins to decrease, it proves to be positive notes on your credit report.
Regarding credit cards, take what you owe on all of your credit cards and divide it by the limit of all of your credit cards. You'll end up with a percentage, the lower the percentage the better. The higher the percentage means that your using your revolving credit way too much and need to pay down your commitments.
Other items that affect your credit score is collections from utilities, medical bills and length of time at your current address. If you find yourself moving around a lot, get a PO Box, or a box at the UPS Store that way you'll keep your address the same even if you just simply move around town all of the time.
Hopefully, these tips are helpful. When you go to purchase a car and know your credit score is over 800, it is definitely a selling point and as a consumer you can demand a lower interest rate. Good luck on getting your score up in the 800s.
