Connections for Success



Your Credit Score Counts! Achieving and Maintaining a Solid One

Quick — do you know your credit score? Perhaps more important, do you know what a solid credit score is today?

Your credit score is a reflection of your creditworthiness. With a high credit score, you may be able to realize lower interest rates on mortgage or auto loans and credit cards. To put yourself in the most-favored category of borrowers, you’ll need a credit score of at least 740. So it’s worth your while to achieve and maintain a score of 740 or higher.

Reviewing Your Credit Report

Credit data is maintained by three major credit-reporting agencies — Equifax, Experian and TransUnion — that share your credit information with lenders and others that request it. To obtain a copy of your credit report, consider visiting According to the Federal Reserve Board, this is the only authorized online source for a free credit report.

Under federal law, you’re entitled to a free report from each of the three national credit-reporting companies once every 12 months. However, you generally must pay a small fee to obtain your credit score. Be aware that there are many disreputable sources that claim to offer free credit reports or scores but then attempt to collect fees or require you to purchase other services.

When you get your report and score, don’t look at just the overall score. Go through the report line by line and make certain everything is accurate. For example, if you’re mistakenly listed as having a lower credit limit than you actually have, get it corrected. The same goes for any other mistakes that might lower your score.

How to Boost Your Score

Your credit score is determined by a number of factors, including your credit history, the amount of debt you have and the types of credit you’ve obtained. If your score is lower than you’d like, the next step is to begin paying down any credit card balances. This carries more weight than paying down installment loans, such as mortgages and car loans. Lenders typically like to see a sizable gap between the amount of credit you’re using and your available credit limits.

Getting (and keeping) your balances below 30% of your limits should put you on the right side of these requirements. Of course, paying off your balances entirely each month is even better because you’ll avoid interest charges.

Don’t be afraid to use credit; just use it wisely. This might seem counterintuitive to frugal folks who are used to paying cash for everything. Keep in mind, though, that credit scores are designed to predict how well you’ll use credit in the future based on how well you’ve used it in the past.

No Credit History?

If you have little or no credit history — even if it’s because you’ve managed your finances better than most people — you’re an unknown quantity as far as the credit-reporting agencies are concerned. The solution is to establish a credit history.

If you don’t currently have a credit card, get at least one of the major cards, such as Visa, MasterCard, Discover or American Express. A major card will build more credibility than, say, retail or gas cards. Regular, even if infrequent, use of these cards will provide the agencies with more data to indicate you can be trusted to handle credit wisely.

A Mistake to Avoid

Don’t make the mistake of assuming a late payment here or there won’t hurt your score. It will. When possible, arrange for automatic bill payments to cover at least your minimum payment — and preferably the full balance — due each month. Likewise, if you’re disputing a payment, don’t let it go. Better to pay it on time and try to recover the money later.

The good news is that, if you pay down significant portions of credit card debt, you could see improvement in your scores within 30 days. Other problems — like liens, bankruptcies and foreclosures — can take much longer to resolve.

Game On!

The benefits of achieving and maintaining a high credit score are many. If your score isn’t as high as you wish, you can take steps to boost it. If you have a solid score of around 740 or higher, congratulations! Now be sure to maintain your score by using credit judiciously and making your credit card payments on a timely basis.

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