sheknowsA good credit score is essential to prosperity. Your credit score not only impacts your ability to get credit, it also impacts the interest rate you pay when you do use credit. Other than lenders, other companies use your credit score. A poor credit score can drive up the cost of your automobile coverage, or cause utility or rental companies to increase the amount of your deposit. Employers often pull a credit report and may use than information to determine hiring eligibility. Wireless or internet providers may increase your deposit or limit your options.

Managing your credit score is a critical housekeeping financial housekeeping chore. To keep a good credit score, pay at least your minimum payment, on time, and restrict your credit balances to less than 1/3rd of the credit available to you. Every time to apply for credit your score goes down slightly, so avoid applying for credit too often. Use one main credit card instead of keeping small balances on many cards. Most important, pay your accounts on time and in full.

Annually, you are entitled to a free credit report from the three reporting agencies, TransUnion, Equifax and Experian. Access your free report at www.annualcreditreport.com.  Here you will see your payment accounts and your status with each.  Electric bills, parking tickets, credit card bills, home mortgages, and more show up on this report.   Review your report carefully to make sure no one has reported a late payment or unpaid balance this is incorrect.  If you do find errors, report them immediately and make sure they are corrected before applying for credit.

Fair Isaac Corporation takes this information from the three reporting agencies, and creates your credit score or FICO® score, which ranges from 300 to 850.  This number will allow credit card companies, automobile lenders, and mortgage lenders to decide how much to lend you and at what interest rate.  The score is based on a combination of your payment history, the amounts you owe, the length of your credit history, how many accounts you have recently opened, and the types of credit available to you.

Fair Isaac Corporation isn’t the only credit scoring company that provides a credit scoring formula. A lesser known company, VantageScore Solutions has a formula that some agencies use.

Reviewing your credit reports is a basic money maintenance task. Just like you get an annual physical, mark your calendar annually to check your credit reports.

If you want to obtain your credit score (which is based on your credit reports), generally you have to pay for that information. A good practice is to ask lenders to provide you a copy of your credit score any time you apply for credit. Don’t be shy about asking them how they viewed your score and what they see you could do to improve your score.

Learn more about consumer credit at http://www.consumerfinance.gov/

A good credit score means more money in your pocket!