Each agency
keeps track of a bunch of information about you...
For the last SEVEN years! Here are the main
categories:
-
Personal Information
- Your address, employment
history and social security number
-
Credit History -
They track all of your
credit cards, banking information and accounts,
mortgages and other loans like car loan and
student loans, some other bills (like your
phones)... But, usually not your rent
payments and utilities (like electric).
-
Public Records -
Bankruptcies, court
judgments against you, alimony, tax problems
-
Inquiries -
Who's been requesting to
see your credit history? Who have you been
applying for credit with? Even your cell
phone company does this. That's why they
ask for your social security numbers.
Your FICO
score is a number ranging from 300-850 that's,
basically, a snap shot of how financially
responsible you are. (FICO
was created by the Fair
Isaac
Corporation.) To
have "good" credit, you'll want to have a FICO score
of, at least, 720. (See the next lesson for
how to do this.)
Here's a
rough break down of what factors into your FICO
score:
35% -
Your Payment History:
If you've had any late
payments and how long it's been since you've had a
late payment.
30% -
Amounts You Owe:
They look at how much you
have on your credit cards, car loans, home loans...
and they look at how much "available" credit you
have. Are your credit cards all maxed out?
This is bad. I've heard that you shouldn't
have more than half of your available balance used
up.
15% -
Length of Your Credit History:
How long have you
had credit cards, etc? The longer the better!
So, don't cancel old credit cards -- even if you
aren't using them. (Unless you have 20, of
course!)
10% -
Types of Credit Used:
They like to see a variety
-- credit cars, car loans, mortgages. A
variety tells them that you know about this stuff
and how to use it.
10% -
New Credit:
This includes new credit cards
and credit inquiries (like if you are trying to get
a car loan and the company runs a credit check on
you). They understand a clump of inquiries
because this type of thing happens when you are
trying to get a mortgage... But, if you keep
having inquiries throughout the year, you are going
to look financially flaky!
Here's
what they DON'T take into account:
Age,
ethnicity, your job or length of time at that job,
level of education, income, marital status, whether
or not you've been turned down for credit, whether
you own or rent and how long you've lived there
Like I said, a
good FICO score is a required ticket of admission
into your financial future... A good FICO
score will, not only get you a mortgage loan, it
will get you a lower interest rate on that loan.
A good FICO score will get you the lowest possible
interest rate on car loans. A good FICO score
will get you lower interest rates on your credit
cards. A good FICO score will get you lower
car insurance rates. And, this will be a scary one for some
of you, employers even check your FICO score before
they hire you! If you are financially
responsible, you are far more likely to be a
responsible employee.
Do I really
need to say what a bad FICO score will get you?
No loans or loans with really high interest rates,
high car insurance rates, high credit card interest
rates, cavities (just seeing if you were paying
attention)... And it might keep you from
getting a good job to pay for all this bad stuff!
A new law has
passed that says you're allowed to get one free
credit report a year. (It usually costs about
$35.) Here's where you can get your free
credit report -- and remember that you don't have to
buy anything or pay any money to do this!
AnnualCreditReport.com***
1-877-322-8228
Snail Mail:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
***Note:
When you go through this site, the credit reports
really ARE free... But, two of the three
companies (Equifax and TransUnion) will ask you if
you want to pay to see your FICO score (the report
is free, not the FICO score). You do NOT need
to do this, because the third company (Experian)
will give you the FICO score for free along with
your report.
You can
search for more information about your FICO score using our Google "safe
search" option. Or you can search for a different
topic on Finance FREAK. A new window will open
with your results.
