Tuesday, August 18, 2009

Credit Scoring Changes We Need to Know

Do you know how your credit score is determined? Do you know that the credit scoring system has changed recently? Do you know what are the changes and how they affect you and your family? Mary Hunt wrote an excellent, easy-to-understand article on this topic in the finance section of Crosswalk.com.

Here is the summary:

1. The new version of credit scoring model, FICO 08, ignores small collections that may appear on your credit report.
2. It is less punishing for those who have had a major setback, such as repossession, as long as their other active credit accounts are in good standing.
3. It allows some authorized-user information to be included when developing that person's credit score.
4. You should never use more than 30% of your available credit, even if you pay your balance in full each month.
5. You should not close credit card accounts, because it will reduce the total amount of your available credit.
6. The accounts you have need to be active, which means you'd better use each one for a very small purchase every month or so.

We all know that good credit score is somewhere between 700-759, and 760-850 is considered excellent. Obtaining your credit score is not free, but you can purchase your score at MyFICO.com for $15.95.

*Tip of the Day
Knowledge is power.