Credit Scores

Credit scores are very important. They influence how much you pay for credit, where you live, what you can buy, and much more. A high credit score can result in lower home and car insurance premiums, better cell phone service packages, access to the rental property of your choice, and so forth. Property owners usually check credit scores before lease signing, and credit card companies and banks check the scores to determine if they should give you credit and the related interest rate. Further, some employers are doing credit checks on prospective employees, especially those dealing with financial matters.

Five factors determine your credit score: the amounts you owe, payment history, length of credit history, new credit, and the types of credit you use. If you want to keep your score high, follow these tips:

• Do not apply for a lot of credit cards, as credit inquiries can remove five points from your credit score.
• Do not apply for credit cards from sources that do not specify a spending limit.
• Do not cancel many credit cards at the same time, as it can suddenly decrease your available credit and affect your score.
• Ensure a long credit history by keeping old credit card accounts open.
• Even if you pay off your balance monthly, do not use more than 30 percent of your available credit monthly.
• Pay all due amounts on time, as your payment history makes 35 percent of your credit score. This includes parking tickets and more. When collection agencies get involved in the mix, your score goes down. Late payment reports also cause a drop.