Your Credit Score

Your credit score is a number derived from your overall credit report and is based primarily on how well you pay your bills and how much you owe. The higher your score, the more likely you are to get a loan... as well as a better interest rate on that loan.

The score used by most lenders is the FICO score, which is a number that ranges between 300 and 850. VantageScore is another credit score, with numbers ranging from 501-990.

Here are the primary pieces used to determine your credit score:

• Paying bills on time. Lenders want customers who pay when expected. On-time payment will show up on your credit report and can raise your credit score. Late payments and how far overdue those payments are will lower your score, as will bankruptcies or accounts that have been turned over to collection agencies.
• Your goal should be to keep loan balances low; not to approach or exceed your credit card limits; and not to owe money to a large number of creditors.
• To have a credit score, you need to have a credit history  such as a credit card, car loan, student loan or home loan. In general, the longer your credit history, the more that will increase your score. If you’re just getting started and need to take out a loan, talk to your banker or a financial adviser about the best ways to approach establishing credit.
• Types of credit. There is no magic mix, but factors that can weigh in your favor include the types and number of accounts you have such as a mix of credit cards and installment loans. Be aware, however, that too many accounts can actually lower a number.
• Applying for numerous accounts in a short period of time can lower your score.
• Does my race or sex affect my score? No, neither does your religion, marital status, or national origin.

Why does a good score matter?

• Your goal should be a high score. Generally speaking, a FICO score of 700 or above is what you should shoot for, with higher scores often translating to lower interest rates. A high credit score and good credit report can make getting credit easier.
• A lower number doesn’t always mean you can’t get credit, but it can make getting a loan harder and can mean higher interest rates because you’re seen as more of a credit risk.
• If you have a low score, you can help bring it up over time by beginning to pay your bills on time again and paying down your loan balances.

Can I get my credit score for free?

Probably not. Unlike the ability to see your credit report for free each year, you likely will have to pay a fee to see your actual credit score. Check with your bank or credit union to see what your options are, or look online. A good place to start would be annualcreditreport.com (www.annualcreditreport.com).