Do you know your credit score?
March 4th, 2008 categories: Home Buyers, Prescott Homeowners
Do you know your credit score?
Credit scores are a vital part of being a consumer and citizen of the United States. A credit score is a number that helps lenders and others predict how likely you are to make your credit payments on time. Each score is based on the information then in your credit report.
If you want to rent an apartment and do not have good credit scores, your apartment application may be turned down by the landlord. Your scores also may determine how big a deposit you will have to pay for telephone, electricity or natural gas service.
Companies that want to lend you money look at your credit scores all the time. They look at your scores when deciding, for example, whether to change your interest rate or credit limit on a credit card, or whether to send you an offer through the mail. Having good credit scores makes your financial dealings a lot easier and can save you money in lower interest rates. That’s why they are a vital part of your financial health.
Today, many people have credit scores that are suffering due to adjustable loans, credit card debt and so on. Not to mention the foreclosure and short sale market and it’s far reaching effects.
There are 5 parts to evaluating your credit score. As a rule, credit scores analyze the credit-related information on your credit report. How they do this varies. Since FICO scores are frequently used, here is how these scores assess what is on your credit report.
| 1. | Your payment history – about 35% of a FICO score Have you paid your credit accounts on time? Late payments, bankruptcies, and other negative items can hurt your credit score. But a solid record of on-time payments helps your score. |
| 2. | How much you owe – about 30% of a FICO score FICO scores look at the amounts you owe on all your accounts, the number of accounts with balances, and how much of your available credit you are using. The more you owe compared to your credit limit, the lower your score will be. |
| 3. | Length of your credit history – about 15% of a FICO score A longer credit history will increase your score. However, you can get a high score with a short credit history if the rest of your credit report shows responsible credit management. |
| 4. | New credit – about 10% of a FICO score If you have recently applied for or opened new credit accounts, your credit score will weigh this fact against the rest of your credit history. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur. If you need a loan, do your rate shopping within a focused period of time, such as 30 days, to avoid lowering your FICO score. |
| 5. | Other factors – about 10% of a FICO score Several minor factors also can influence your score. For example, having a mix of credit types on your credit report – credit cards, installment loans such as a mortgage or auto loan, and personal lines of credit – is normal for people with longer credit histories and can add slightly to their scores. |
There are many resourses available to check your credit. Make sure you keep your credit in good health. It may come in handy some day…
What a great article. One of the most frustrating things to do in the home buying process. Buyers have no clue sometimes what they need to do or why they can’t purchase that new TV before buying a home. I found your article to be very helpful and hope more people use the resources. Keep up the great blog. David
Hello David,
Thank you so much and I’m glad you found the article helpful.
Best Regards,
Sue Brown
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