By the Numbers
Your credit score is a three-digit number with a large impact. Here’s how to keep your number looking smart and how to understand what goes into calculating your score.
760 | The golden number. Anything above this is gravy. |
You’ll get the best rates from lenders if you have a score of 760 or above. You can always aspire to move your number higher, but that won’t get you any better rates. For all you perfectionists, the highest you can get is 850. Good luck.
Tip: Don’t close an unused credit card account in an attempt to boost your score—it could backfire by erasing some of your good credit history (but it won’t erase the late payments). Another bad strategy: opening a number of credit cards you don’t need.
Source: www.bankrate.com
30 | The maximum percentage of your credit card limit you should use |
Keeping a gap between your balance and available credit shows lenders you’re responsible (pat yourself on the back). It will take some conscientiousness and time to manage multiple credit cards, but in the end you will receive better loan rates because of your higher credit score. Also try to zero out your balance every month to continue building a stellar score and avoid paying interest.
Tip: Have two or three credit cards with lower balances instead of one card that’s regularly pushed to its limit.
Source: moneygirl.quickanddirtytips.com
$100,000 | The amount you’ll save on a thirty-year mortgage if you have great credit. |
A person with score of 750 will receive lower interest rates and will pay about 100,000 clams less on a thirty-year mortgage than someone with a score of 550. If you find yourself loan shopping, remember to complete it within two weeks, because your credit score will be pulled multiple times by various lenders. This can hurt your score if your perusing is drawn out.
Tip: Invest the money saved by having good credit into a retirement account.
Sources: moneygirl.quickanddirtytips.com, myfico.com
35 | The percent of your score influenced by payment history. |
It’s kind of like breaking a mirror: if a bill goes to a collections agency, your credit report won’t forget about it for at least seven years. Other numbers that influence your FICO score: amounts owed (30 percent), length of credit history (15 percent), new credit (10 percent), and types of credit in use (10 percent). A sixty-day late payment is not as serious as one that’s ninety days late. Frequency is also a factor: a sixty-day late payment last month will affect your score more than a ninety-day late payment from 2006.
Tip: Don’t slack—pay those bills on time.
Sources: moneygirl.quickanddirtytips.com, myfico.com
43.4 million | The number of Americans with credit scores below 600. |
Reducing your debt is another way to give your score a boost. While it’s important to be cautious with credit cards, it’s equally essential not to be scared of them. Someone sans credit cards is viewed by lenders as more risky than people who have sensibly managed their plastic.
Tip: Pay down your balances to raise your score.
Sources: LA Times, moneygirl.quickanddirtytips.com
3 | The number of credit reporting agencies that provide free reports. |
Reviewing your credit report is particularly important if you’re purchasing a house or car in the near future. But here’s the catch: the free credit reports don’t include your actual credit score. You can buy this number from the individual reporting web sites or from myFICO.com. (Google “FICO coupon” to find discounts.) If the report looks accurate, then you don’t need to buy the score unless you’re curious how you rank. If there is any incorrect credit or personal information, don’t sit on it—contact the reporting bureau right away. Visit annualcreditreport.com for more details.
Tip: Schedule reminders on your calendar every four months to run your credit report. You’re entitled to one free report from Equifax, Experian, and TransUnion each year.
Sources: myfico.com, money.usnews.com
