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Upcoming Sessions

(Tuesday Evenings)
3, 10, 17, 24
(Monday Evenings)
7, 14, 21, 28
(Tuesday Evenings)
5, 12, 19, 26

Scoring With Good Credit

We’ve talked about the importance of maintaining a good credit record, and how that record influences the interest rate you receive on future loans. But what is my “score?”

Your credit score, or FICO (Fair Isaac & Co.), is a snapshot of information contained in your credit file at the time your score is requested. This number is a tool, one of many, used by lenders to help them decide how likely you are to repay your loan on time. There are a number of facts, beside your FICO, which are also taken into consideration when decisions pertaining to lending are made. The credit score, however, is an important factor in the equation.

Let’s take a closer look at how the score is calculated. The following information, and its’ importance, make up the FICO score;

35% Payment History
30% Capacity (available credit)
15% Length of Credit
10% Search & Acquisition for New Credit
10% Type of Credit

Your payment history is your track record, and the factor that carries the most weight in determining your score. It shows patterns of timely or late payments. Paying your debts on time is the single most important thing you can do.

If the total amount of money you owe is a large sum, spread over several accounts, it may indicate that you are overextended and more likely to make late payments, or skip one altogether. Don’t accept credit accounts you don’t plan to use, make sure the balances you carry are well below your available limit.

A longer credit history will generally raise your score, as long as the history you’ve created is one of timely payments. Again, this shows a pattern of responsibility.

Lots of students have asked me if too many credit inquiries lower your credit score. There are different kinds of inquiries. Those known as “soft” inquiries would be employers, landlords and promotional. A “hard” inquiry would be one that was initiated by you for the purpose of securing financing. Soft inquiries do not lower your score. Remember that opening several credit cards in a short period of time will hurt your score.

Finally, do you have a healthy mix of credit? Having too many unsecured loans, such as credit cards, does not indicate sensible borrowing. An auto loan or home mortgage can balance things out.

Remember, paying your bills on time is the best single action you can do to maintain a great credit rating!