David M Shapiro
Certified Financial Fiduciary
Keeping Score for Your Credit
The saying, "Give credit where credit is due," should apply to personal finance, but sometimes the decision to extend credit is based on a single number: your credit score. Having a high score not only could make it easier to obtain credit but might reduce the interest rate you pay. It may also affect other financial transactions such as renting a home or buying insurance coverage.
The most common credit score is based on software developed by Fair Isaac Corporation (FICO®) and expressed as a three-digit number ranging from 300 to 850 (see chart). The score is derived from a formula using five weighted components: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and types of credit in use (10%).
Here are some tips that could help you maintain or potentially improve your score:
- Use at least one major credit card regularly and pay your accounts on time. Setting up automatic payments could help avoid missed payments.
- If you do miss a payment, contact the lender and bring the account up to date as soon as possible.
- Keep balances low on credit cards and other revolving debt.
- Use older credit cards occasionally to keep them active. Closing them may actually hurt your score.
- Don't open or close multiple accounts within a short period of time. Only open accounts you need.
- Monitor your credit report regularly.
You can order a free credit report annually from each of the three major consumer reporting agencies at annualcreditreport.com or by calling (877) 322-8228. You'll usually have to pay to see your credit score. If you are turned down for credit or receive less-than-favorable terms, you have a right to receive your score for free from the lender with an explanation of how the determination was made.
If you find incorrect information on your credit report, contact the reporting agency in writing, provide copies of any corroborating documents, and ask for an investigation. For more information, see consumer.ftc.gov/articles/0155-free-credit-reports.
1) Fair Isaac Corporation, 2014
Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2014 Emerald Connect, LLC.
All written content on this site is for information purposes only. Opinions expressed herein are solely those of Peak Investment Coaching, LLC (PIC) and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual adviser prior to implementation. Fee-based financial planning and investment advisory services are offered by PIC, a Registered Investment Advisor in the State of Utah. Insurance products and services are offered through David M. Shapiro, an independent insurance agent. PIC is owned by David M. Shapiro. The presence of this web site shall in no way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any State other than the State of Utah or where otherwise legally permitted. PIC not does offer tax or legal advice.