Because landlords, insurance companies and employers are now doing credit checks as a way to evaluate your personal financial character, DMB Financial likes to remind its clients the importance of managing their credit scores—especially with the latest ongoing credit squeeze. 

 

Credit scores range from 300 to 850 and a score over 700 is generally considered by most creditors to be “good.” Unfortunately, reaching that number is not quite as simple as paying bills on time. While payment history does account for 30% of your FICO score, there are several other factors that affect your score:

 

1.      Not checking your credit report regularly. Request a free copy of your credit report each year from www.annualcreditreport.com. Familiarize yourself with your credit history and review it for accuracy.  The Union Plus myFICO Discount provides additional credit monitoring and tools to help you repair your credit.

 

2.      Having too many inquiries. Generally, six or more inquiries within a six-month period of time will scare a lender. Applying for loans on the Internet and frequently transferring balances on credit cards can also have negative consequences. However, most credit scores are not affected by multiple inquiries from auto and mortgage lenders within a short period of time.

 

3.      Staying out of debt. Having no credit history is nearly as bad as having poor credit history. From a creditor’s perspective, if you have no debt, they have no way to judge how you would handle a loan. Consequently, successfully managing several types of accounts proves that you can handle responsibility.

 

4.      Making late payments. There are several negative consequences to making late payments and the “Universal Default” clause is one of them. Under this clause, the creditor who you have always paid on time may raise your interest rate if you are late on OTHER credit obligations.

 

5.      Closing old accounts. It may seem wise to close old, unused accounts, but doing so could shorten the length of your credit history and harm your score. Credit history makes up a whopping 15% of your score. If you choose to keep old accounts open, be sure to keep tabs on them regularly to be certain they are not being used fraudulently.

 

Finally, when trying to improve your credit score, be persistent and patient. Scores are continually updated and may fluctuate several points each month. According to Fair Isaac & Co., a person with a FICO score of 689 can qualify for a 7.81% interest rate on a 60-month new vehicle loan. However, a person with a score only one point higher can obtain that same loan at the much lower rate of 5.58%.