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What's your score?
The news has just hit the street that you can now find out
your credit
score. Until just last week, you were not able to see this
credit score.
Lenders use your credit score to determine if they will loan
you money
and what the interest rate will be. Your score is based on
how well you
paid your past debts, whether your debt load looks too high
and how much
credit is available to you.
Credit scores are based on a FICO formula. FICO stands for
Fair, Isaac &
CO., the company who developed the scoring system. The
scores run from
300 (worst) to 850 and are generated through complex
statistical models.
The models analyze your credit history based on five
categories: payment
history, amount you owe, length of credit history, new
credit and credit
mix.
Payment history. Thirty-five percent of your score comes
from your
credit account payments, with most recent payments counting
more than
older payments. If you have paid your bills on time
consistently, your
score will be higher.
Amount you owe. Thirty percent is based on your current debt
load, how
much you owe on all of your accounts if you generally carry
an unpaid
balance on credit card accounts. Getting credit only when
you need it
and using it below your credit limits, leads to higher
scores.
Length of credit history. Fifteen percent of your score is
based on how
long you've used credit.
New credit. Ten percent is based on recent credit
applications. You'll
be scored lower if you have been loading up on credit. In
other words,
don't get a credit card just for the 10 percent discount on
that day's
shopping. Having access to lots of credit, even if you don't
use it,
lowers your credit score. If you do not want to receive
unsolicited
credit offers, call 1-888-5 OPT OUT (1-888-567-8688) and
your name will
be removed from all three credit bureaus for possible
solicitation.
Credit mix. The last 10 percent is based on the type of
lenders you deal
with.
Prime borrowers have scores in the 620 to 660 range (this
varies among
lenders) and qualify for loans with the best interest rates
and terms.
Only Equifax will give you your credit score online and it
will cost you
$12.50. Once you answer a series of questions that will
verify you are
who you say you are, your credit report will be available to
you online
for 30 days. To get your FICO score, go to www.equifax.com.
I'm not sure that knowing your credit score is worth $12.50.
You can get
a free credit report from all of the credit bureaus and this
gives you a
good picture of how you look to others. If all of your
credit is
relatively good, use the information about your credit
history to
negotiate with new creditors.
For more information, contact your local
Colorado State University Extension office.
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