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Running Up Your Credit Score

Running Up Your Credit ScoreA credit score is a measure of risk based on a person’s credit history. It indicates how likely they are to repay a loan and make payments on time.

People with higher scores are considered lower risk and likely to get better loan terms than people with low scores.

People with low scores are considered to be at higher risk for not re-paying a loan, and therefore don’t get the best loan terms. A credit score can range from 300 to 900 depending on the rating agency.

Generally, about 35 percent of the score is based on payment history; 30 percent is based on the ratio of outstanding debt to credit available, even if the credit hasn’t been used,15 percent is based on how long you have had credit; 10 percent is based on the number of inquiries into a report; and 10 percent is based on types of credit.

Here are some helpful hints that will improve your credit score:

  • Pay your bills on time: Pay at least the minimum due, but paying more is even better.
  • Set a budget and stick to it: Develop a financial plan to keep your finances in order. Don’t spend more than you can repay and don’t “max out” your credit cards.
  • Comparison shop: Don’t jump at the first appealing offer; compare rates and fees offered through mail solicitation, on the Internet or at your local bank.
  • Don’t skim, read the fine print: A loan or credit card application is a contract, so read it thoroughly before signing. Be aware of introductory rates that expire, as well as the length of monthly billing cycles.
  • Ask questions: If you don’t understand the terms of a loan, ask. If you’ve been denied credit, find out why and then ask the lender how you can improve your chance for approval in the future.