Tuesday, October 18, 2011
Greetings Thrifty Friends,
The best way to pay lower percentage rates is to improve your credit score. But if you don't understand how your score is calculated or you fail to pay attention to your score at all, that can be very hard to do.
A FICO score is the most common credit score, but how is it calculated? Scroll down to find out exactly what goes into your credit score.
Keep pinchin' those pennies,
Penny
*****
TODAY'S THRIFTY TIP:
Five major factors go into a FICO score: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and types of credit used (10%). All it takes is a poor showing in one of these categories and your score can drop.
Let's say you have a long credit history and always pay your bills on time, but you typically spend 90% of your available credit limit. That percentage, or credit utilization ratio, can drag down the 'amounts owed' portion of your FICO score because it signals to lenders that you're a risky borrower. Use closer to 30% of your available credit and you can raise your score because you're telling lenders you have your spending under control.
If you are denied credit or charged a higher interest rate due to your credit score, lenders now are required to provide you with a copy of your score at no cost.