Your Credit Score Demystified

The HIGHER The BETTER: CREDIT SCORES What Determines My Credit Score? Payment History Length of Credit History The factor that has the biggest impact In general, a longer credit history will increase your credit score because it shows that you can responsibly manage on your score is whether you've paid 35% your available credit over time. However, even people who have not been using credit very long may get high scores, past credit accounts on time. However, depending on how the rest of their credit report looks. an overall good credit picture can outweigh a few late payments which will 15% continue to have less impact over time New Credit unless the late payment is a mortgage payment. People today tend to have more credit and to shop for credit more frequently. But opening several credit accounts in a short period of time can represent greater risk – 10% especially for people with short credit histories. Requests for new credit can also represent greater risk. However, credit scores are able to distinguish between a search for many new credit accounts and rate shopping. FICO scores generally do not equate your rate search with higher credit risk. Amounts Owed Having credit accounts and owing money doesn't mean you're a high-risk borrower. But owing a lot of money on Types of Credit in Use numerous accounts can suggest that 10% Your credit score will reflect a combination of credit cards, retail accounts, you are financially overextended and 30% may be more likely to make some installment loans, finance company accounts and mortgage loans. While a healthy payments late or not at all. Part of the mix will improve your score, it is not necessary to have one of each, and it is not a science of scoring is determining how good idea to open credit accounts you don't intend to use. The credit mix usually much debt is too much for a given won't be a key factor in determining your score, but it will be more important if your credit profile. credit report doesn't have much other information on which to base a score. Credit Score RANGES Most credit scores range from 300 to 900, with the majority of people in the 600 to 800 range. To get the most favorable interest rates, you'll need a score of 720 or higher. In terms of interest rates, on average, a person with a credit score of 520 will get interest rates on loans that are three to four percentage points higher than rates given to a person with a credit score of 720. majority of people 300 600 900 720 most favorable interest rates Credit Score MYTHS Average CREDIT SCORES BY STATE O Alabama O Kentucky O Louisiana O Maine • Maryland 676 677 North Dakota 706 Alaska 674 663 Ohio 685 CLOSED Arizona 659 699 Oklahoma 666 O Arkansas O California 668 688 Oregon O Pennsylvania • Rhode Island O South Carolina 686 672 Massachusetts 703 696 One of the most popular myths about credit scores is that closing an account will O Colorado Connecticut 674 O Michigan 679 692 improve your credit score. While having too many open accounts may hurt your score, closing an account puts an end to your credit history with that creditor. Your credit 694 Minnesota 707 665 O Mississippi O Missouri O Montana Delaware 684 668 South Dakota 710 history is a vital part of calculating your credit score. If you want to inmprove your score, OD. of Colombia O Florida O Georgia 677 683 Tennessee 679 it's generally better to pay down your balances than it is to close your accounts- 673 701 Texas 651 especially older accounts. 668 Nebraska 695 O Utah 683 Hawaii 688 Nevada 655 Vermont 706 O Idaho New Hampshire 703 O New Jersey O New Mexico Virginia Washington O West Virginia 688 689 O Illinois O Indiana 684 693 691 REPORT 676 663 679 lowa 700 O New York 686 Wisconsin 699 Another popular credit score myth is that ordering a report can hurt your credit score. While applying for a new line of credit may affect your score negatively, ordering a O Kansas 682 O North Carolina 667 Wyoming 690 credit report does not hurt your credit. If you're in the market for a new home and you need to inquire with several lending companies, it's a good idea to do so in a short NH period of time. Multiple inquiries within a 45-day period of time are generally treated MT VT as a single inquiry. MN ID SD WY JA NE NV UT DE co KS мо OK One final myth that gets passed around the lending community is that seeking consumer AR counseling is as damaging to your credit as filing for bankruptcy. While this type of coun- AL GA MS seling may alert potential lenders of a credit concern, most lenders look at the bigger picture. Some even see consumer counseling as a positive sign of a commitment to making lasting changes in your credit payment habits.