Does your credit score really affect you?

YES! It sure does! Your credit may be reviewed by landlords, insurance companies, or future employers! Each one is looking at how you handle credit. You may find that your credit card holder may decrease your line of credit or increase your rate based on an annual review of your credit scores.

What is a credit score? It is a three digit number that lenders use to measure your credit worthiness. A score of 720 used to be good but with the recent financial upheaval lenders are looking for scores of 740 or more to get the best mortgage rates. Fannie Mae recently increased its minimum score requirements from 580 to 620.

How is a credit score determined?

15% – the length of your credit history
35% – your payment history
30% – amount of available credit you are using
10% – new credit transactions
10% – other factors

Common mistakes can affect your score. The higher your credit score the harder the punishment for making a mistake. Here are some examples of the number of points you can expect to lose for certain credit mistakes:

                                                Score 680                    Score 780

Maxed out Credit card -10 to -30                     -25 to -45
30 day late payment    -60 to -89                     -90 to -110
Debt settlement          -45 to -65                    -105 to -125
Foreclosure                 -85 to -105                 -140 to -160
Bankruptcy                -130 to -150                   220 to -240

To increase your score you must continue to use your credit cards but pay them off each month. Keep your balances under 30% of the credit limit. Pay off debt balances as soon as possible. You must have a major credit card – not just retail cards. And finally, keep a watch on your credit bureau to make sure nothing is being reported incorrectly.

You can check your credit report for free once per year from each of the 3 credit reporting agencies at: http://www.AnnualCreditReport.com. Although your credit report is free, you will have to pay for your credit scores.

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