by Elle Tay

Created on: May 23, 2008

Be informed of your credit score

The first step to having good credit is know where you stand. You're credit score determines whether you get that credit card you applied or the home loan you're are hoping for. Not only does it determine what you are able to get but it also determines what your interest rates will be. A poor credit score will produce a high interest rate while a excellent credit score will produce very low interest. Here is an example of how your credit score affects getting a mortgage:

But how is your credit score calculated?

There are five categories you should keep in mind when looking at your credit score.

1. Paying your bills- This is the most important factor in your score. Paying your bills on time every month consistently is good and will raise and maintain your credit score.

2. The amount of money you owe- This is a compilation of all the money you owe on credit cards, car loans, mortgages, home equity lines, etc. That amount is put against how much total credit you have.

3. Length of credit history- The longer you have had credit, especially with the same issuer the better.

4. Mix of credit- Better scores will have a mix of revolving credit, such as credit cards, and installment credit, such as mortgages and car loans. People with a mixture like this statistically handle their money better.

5. New credit applications- Every time you fill out an application for new credit your credit score is pulled. Every time this happens points are shaved from your score. So next time your thinking about those credit cards or store cards that you want really bad choose wisely and pick only a couple.

To keep a good eye on your credit you should check your report at least once every year, but you can do so monthly as well, most creditors send updates to the credit bureaus' on a monthly basis. And don't worry, if you are checking your credit score for yourself then it will not affect your score.

Let's Review

1. Your credit score is determined by a number typically ranging from 301 to 720. This number determines whether or not you are approved for a loan or credit card and what your interest rate would be if approved.

2. There are five categories to keep in mind when reviewing your credit score. Paying your bills, how much money you owe, length of your credit history, mix of credit (credit card and installment credit) and lastly new credit application.

3. Make sure you are checking you credit report once every year.

How do I get my credit score?

Now that you have

• 1
• 2
• 3
• 4
• 5
• 6
• Next Page >>