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Nov 18, 2008 11:19 am US/Eastern
Five Easy Steps To Better Your Credit Score
BOSTON (WBZ) ―
Have you checked your credit score lately?
As the global economic crisis continues to widen, credit scores are more important than ever. A slip of just a few points can slam the door on your dream home, raise your car insurance, it can even keep you from getting a job.
Some doctors and hospitals are even checking credit scores before they'll schedule elective procedures.
"If you don't pay attention to it, it will cost you," explained mortgage veteran and credit expert Al Bingham.
The 'Safe' Range
Bingham is also the author of "
The Road to 850," a guide to understanding credit scores and how to improve them. Eight hundred fifty is a perfect score.
Just like SATs, perfect is rare.
Bingham says if you want to be eligible for credit you want to be 680 or higher, slip below that number and you could have trouble getting a loan or credit card.
We asked Bingham to see what he could do for Brian Peters and Ken and Darlene Fultz.
Brian is a divorced dad from Haverhill, looking for his own place. His starting score was 643.
Ken and Darlene wanted to move to a bigger home. They started with a credit score of 612. "We thought, we've always been able to qualify, we always will be able to qualify," said Ken.
A year ago, that may have been true. Now, many lenders would consider both Brian and the Fultz's sub-prime.
How To Make It BetterBingham's road to a higher credit score starts with a few simple steps.
Credit Tip #1: Take out a loan. Lenders want to see that you can pay on a schedule, so if you don't have a mortgage, a car loan, or a personal loan it could actually hurt your score.
Credit Tip #2: Keep your balances low. It's important to keep your balances below 30 percent of your credit limit. If you're over, paying down the balance will immediately boost your score.
Credit Tip #3: Avoid credit card incentives. As the holiday season approaches it may sound like a great idea to open a credit card to save 10 percent. But if you do it more than once, you'll see your number drop.
Credit Tip #4: Know your lender. Using a finance company rather than a bank can hurt your score. Finance companies do a lot of those pay now, no interest for six month deals.
Credit Tip #5: Protect established accounts. These are the accounts you've had for years. Bingham calls these your "golden accounts." He says pay them on time and use them to keep them active. Closing one of these accounts could actually hurt your score.
Months after following Bingham's strategy, Brian's score went from 643 to 730. That's up more than 80 points and puts him well above the magic number. "I'm psyched, especially going forward, the only place I'm going is up," Brain said.
Ken and Darlene hit the Jackpot. Their score went from 612 to 743, a 131 point jump and they just closed on a new house. "The interest rate that we were able to get saves us $400 a month."
That's a huge payoff at a time when many need it most.
How To Find Your Credit Score
There is a fee associated with finding out your credit score. You can request your credit score from any of the three major credit reporting companies (contact information below).
You are eligible to receive a free credit
report each year from each of those three companies. To get your free credit report you must access it through
annualcreditreport.com.
Equifax
Phone: (800) 525-6285
Website:
www.equifax.com
Experian
Phone: (888 )397-3742
Website: www.experian.com
TransUnion
Phone: (800) 680-7289
Website: www.transunion.com
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