Three Magic Little Numbers – What You Need to Know About Your Credit Score

750. 680. 705.

No, these aren’t area codes. These are some typical credit scores around the nation!

Have you ever wondered how those three magical digits are ever determined? It may seem like a monkey randomly selects lottery balls to determine your credit score, but there is actually a well-designed formula for figuring it out. These scores range from 300 (which is really, really horrible) to 850 (the best). Here is how it’s calculated!

Your Payment History (35%) – The largest chunk of this formula is determined by your bills or fines and if you regularly pay them on time or not. Did you know that even unpaid parking tickets, medical bills, and library fines may appear on your history? You know what that means, right? That’s right – no more hiding those parking tickets in your glove box if you want a high credit score!

The Amount You Owe (30%) – The next largest chunk of the credit score formula is attributed to how much money you owe on each credit card and how that compares with the total credit available to you or the total loan amount you took out. So if you’re constantly maxing out your credit cards, your score could suffer, especially if you don’t make timely payments. And whatever you do, don’t take the tactic of daisy-chaining credit cards to pay each other off unless you want to find yourself living on Ramen noodles for the rest of your life!

The Length of Your Credit History (15%) – How long you’ve had each account and the duration of activity on those accounts amount for fifteen percent of your credit score. In general, assuming you make timely payments, the fewer and older the accounts you have, the better off you’ll be.

Types of Credit You Use (10%) – Yes, there are different types of loans. They include credit cards, retail credit accounts, mortgages, installment loans, and consumer finance accounts. If you have some of these types of loans and make timely payments on them, your credit score should benefit as it shows that you can handle different types of loans, large and small alike. Keep in mind that credit cards will usually carry more weight in this equation since they will more than likely predict if you’re likely to go on a no-holds-barred shopping spree in the near future… over and over and over again.

New Credit (10%) – This refers to how much credit you have taken out recently. If you have recently applied for thousands of dollars in loans and continue to request more lines of credit, your lender may become quite concerned as they may think you’re in dire financial straights. Not that you can’t ever seek new credit – you just need to be selective and try to shop around for your auto loans or mortgages within six weeks or less.

So now you know what these numbers are about. The question is – what should you do about it?

The goal is to make sure that your credit number gets as high as it can and stays that way. For the best rates on credit cards or loans, you’ll want a score around 700, at least.

“How do you do THAT, Tammie?” you ask. Here’s how!

*Pay all of your bills on time!

*Keep your balance low. Shoot for less than one-third of your total credit limit.

*Have at least one credit card that you plan to use for a long time. Be careful not to have too many!

*Pay off your balance entirely every month.

*Stay on top of the information in your reports as much as you can.

Remember – the higher your score, the more money you can borrow, and the less you’ll have to pay for the loan!

Oh, and mortgage companies check three different bureaus for your credit scores – Equifax, Experian, and TransUnion. They are the three biggest credit-reporting agencies. Luckily, you can obtain a free copy of your credit report from each of the three major credit agencies once each year! You should order it through, which is the only authorized online site under the federal law.

Want more information on credit scores? Need someone to help you refinance loans? Look no further! Call me at (618) 709-3821 or visit my website at to see what I can do for you!