Daily Dupaco

Monday, July 18, 2011

What's in a number?

Do you know your credit score?

That one number tells lenders and others plenty about you - and can determine whether you're eligible for a home loan, credit card or other services.

Cindy Hilkin, a loan consultant at Dupaco Community Credit Union, recommends pulling and reviewing your credit report every six months to help fight identity theft and check for errors and other hidden surprises.

"Most people don't find out about something until they go to apply for a loan, and then it's very difficult and time consuming to fix," she says.

You can obtain a free credit report through your financial institution or by visiting www.annualcreditreport.com, which allows you to request a free credit report once every 12 months from each of the three credit reporting bureaus.

Research shows about one in four credit reports contains an error, which can cause you to pay higher interest rates or even be denied a loan. You can dispute and correct your reports through the credit reporting bureaus.

What determines your credit score? While it's based on a complex formula, here are the basics:

  • Credit scores typically range from the 300s to the 800s. Try to stay above the average 650 score. 
  • The No. 1 thing that will hurt your credit score is missing a payment. It doesn't matter whether it's a $20 credit card bill or a $1,000 mortgage payment. They'll both hurt your score equally - and can negatively affect it for as long as 24 months. The other main way to hurt your score is by maxing out your credit cards.
  • To improve your score, pay down those credit cards, make your payments on time and avoid opening several credit cards. 
  • Consumers often are under a misconception about what affects their score. "They always think their checking account or their income or how long they've been at a job affects their score, but the credit bureau has no idea about any of these factors," Hilkin says.
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