Credit Basics

KNOW Your Report. BOOST Your SCORE!

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CREDIT 101

    A Credit Score is a number between 300 and 850 (depending on the Bureau) that indicates your creditworthiness, or your risk grade .
    There's a whole lot that goes into the score, and although the Formula to generate that magic number is "Top-Secret", you can still understand what it is about your financial actions the Bureaus consider.
    Remember: It's ALIVE, like you are. This means that everything you do has the potential to effect it. Also, it changes just about everyday based on your financial actions - good or bad.

    Your Credit Score is built using the following 5 General Categories:

            35% Payment History
                    Quick Tip: Paying off a collection account won't remove it from your report - it may lower your score initially because you're 'reminding' the reporting agencies about the debt. Nonetheless - PAY IT, your credit will thank you in the long run.
            30% Amounts Owed
                    Quick Tip: Don't close accounts just because you don't use them - thinking that it will be quick improvement to your score. That will backfire on you: see next General Category...
            15% Length of Credit History
                    Quick Tip: New accounts will lower your average account age. Be careful opening new accounts if you are trying to get approved for a large purchase.
            10% New Credit
                    Quick Tip: It's okay to check your own report. Many people assume that "checking or running" their credit will hurt them. This is not the case - however, be cautious for shopping for financing as you'll have a window of time to check that report for a single reason, i.e. shopping for mortgage rate or the best car loan. More on this later.
            10% Types of Credit
                    Quick Tip: It's okay to have a few, even several credit cards - but you MUST manage them responsibly... 35% of your score is based on Payment History. The BEST thing you can do to BOOST that score is to pay all your bills on time.

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