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Financial Education

Your Credit Score

credit score

Do you know your credit score?

Your credit score matters whether you need a credit card, auto loan, mortgage or some other sort of credit.  In general, higher scores mean you are more likely to be approved and you will be charged a lower interest rate on any new credit.

 Most companies use a FICO credit score that is made up of five parts:

 Your payment history – 35%

Have you paid your credit accounts on time?  Late payments, no matter what amount, can hurt your score.

How much you owe – 30%

FICO scores look at the amounts you owe on all your credit accounts, the number of accounts with balances, and how much of your available credit you are using.  The more you owe compared to your credit limit, the lower your score will be.

Length of credit history – 15%

A longer credit history will increase your score.  However, you can get a high score with a short credit history if the rest of your credit report shows responsible credit management.

New credit – 10%

If you have recently applied for or opened new credit accounts, your credit score will weigh this fact against the rest of your credit history.  FICO scores distinguish between a search for a single loan and the search for many new credit lines, in part by the length of time over which inquires occur.  If you need a loan, do your rate shopping within a focused period of time, such as 30 days, to avoid lowering your FICO score.

Other factors – 10%

Several minor factors can also influence your score.  For example, having a mix of credit types on your credit report – credit cards, installment loans such as a mortgage or auto loan, and personal lines of credit – is normal for people with longer credit histories and can add slightly to their scores.

What’s a good score?

FICO scores range from 300 – 850.  The higher the score the better.  Most lenders prefer a score of 700+ as an indication of financial health. 

What’s NOT in your score?

By law, credit scores may not consider your race, color, religion, national origin, sex and marital status, and whether you receive public assistance or exercise any consumer right under the federal Equal Credit Opportunity Act or Fair Credit Reporting Act.

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