About your Credit Score

Credit scoring systems assign points to factors that help predict who is most likely to repay a debt. Your credit score helps predict how likely it is that you will repay a loan and make the payments when due.

The most commonly used scoring systems give you a number from the mid-300s to the mid-800's, with high scores being better. Scores vary depending on the type of credit you are seeking. For example, recent auto loan history is weighed more heavily when applying for a car loan.

What goes into your score?

• Current balances on accounts : Accounts showing all payments were on time are positive.
• Reported delinquencies : Negative, especially if severe and recent.
• Bank revolving accounts : Lack of accounts, or too many can be negative.
• Number of accounts with balances : Too many credit card accounts may have a negative effect on your score.
• Number of finance company accounts : Loans from finance companies may negatively affect your credit score
• Recent payment history : An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances
• Number of recent inquiries : Not all inquiries are counted. Inquiries by you, or creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.
• Number of accounts opened within the last year : Adding too many new accounts can be negative.
• Proportion of balance to your credit limit : If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score
• Length of time accounts established : Long-established accounts are positive
• No recent (non-mortgage) account balance information : Can be negative when seeking mortgage loans
• Legal item filed or collection item reported : Negative, effect decreases with time.
• Accounts not paid as agreed and/or legal item filed : Your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy
• Employment and residency : Longer time in your job and at your residence can help your score.

If your score is less than optimal, reason codes are given, which helps the credit grantor indicate why you have been declined credit. For example: "Too many accounts opened in the last 12 months." Each credit-granting company decides the cutoff points. Borderline applicants are sometimes given to management for a more personal review.

Keep in mind...

• Your score is likely to go down by a few points with each inquiry by potential credit grantors. (Inquiries by you do not affect your score.)
• Your score will change with the age, balance, and status of your credit accounts.
• Lenders use different or custom scoring models, so the numbers will vary, and they may be meaningless to you.
• Some companies do not use scores.

How can I improve my Score?

Concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.