Diversity MBA Magazine - April 2008 - (Page 66) How to Raise Your Credit Score By Mark V. Reynolds By all accounts, you’re a living success story. You’ve worked hard to get a good education, you’re moving along in your chosen profession, and you’re a positive figure in your community. It seems that those factors alone should be enough to affirm your good name and character. But while all those things are nice (and important), the biggest factor standing between you and your next upward move might be a three-digit number between 200 and 800. That number is your credit score, and while there’s a bit of mystery as to how it’s calculated, there’s no mystery at all about what it means to customers and lenders alike. Lenders extend credit to customers based on their likelihood to repay the credit in a timely manner. Your credit score is a snapshot of how you’ve handled credit in the past, your current obligations, and your wherewithal to meet them. If you’ve been timely with bills, loan payments and other obligations, lenders will be more likely to consider you a good credit risk, and you’ll have more flexibility to plan your finances. Unfortunately, most people don’t have perfect credit. There may have been some rough patches where bills weren’t paid on time, or other obligations piled up. Also, many consumers in the last few months have been hurt by the crisis in the sub-prime loan industry. Incidents like those will bring a credit score down, and more serious financial situations may raise a red flag to some lenders. But the good news is that even a poor credit score isn’t a permanent mark. By following some simple rules and establishing a routine of common-sense habits and discipline, any credit score can be improved. 66 w w w. d ive r s it y mb a ma g a z in e. c o m What is a credit score? Your credit score (mortgage lenders call it your FICO score) is a numerical index, which represents an estimate of your financial creditworthiness. Three main bureaus - Equifax, Experian, and TransUnion – do most of the score calculating and reporting. Scores above 720 get the best rates. The ideal credit score is made up of both installment and revolving accounts, including mortgages, automobile loans, and about four or five credit cards. Your prior payment history - paying bills as agreed and on time - accounts for about 35 percent of the score. It’s based primarily on the most recent six months, and while larger loans such as mortgages have a large bearing in this area, credit bureaus also look closely at credit card debt. While there is a http://www.diversitymbamagazine.com
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.