Paul Ferraresi

A strong credit score can save you thousands in interest expense over your lifetime. There are many myths about how to maintain a strong score. A score of 720 or above will give you access to some of the best interest rates.

There are 3 credit rating agencies … Equifax, Experian and TransUnion. They all produce their own FICO Scores (developed from the Fair Issac Company) with various permutations and combinations of formulas. When you get all three company scores and if they are, say, 630, 721, and 752, then, the credit issuing company will use the middle score, in this case 721.

There are five components that go into your credit score and each makes up a percentage of your final score: Payment History (35%); amounts owed (30%); length of credit history (15%); new credit (10%) and types of credit (10%).

Some important thoughts to consider:
• The fastest way to ruin your credit score is with late payments
• Six months of on-time payments helps to build your score
• If you make a late payment, send a letter to the creditor and explain why it is late. Many times they will make an adjustment for you.
• Your payment history and amount owed is the most important items comprising 65% of your score
• Consistently pay more than the minimum due
• Keep the ratio of amount owed on the card to the credit line at no more than 40%. So with a $5,000 credit line never have the balance higher than $2,000. Yet, if you have a very low balance and you pay it off in full … it does you no good. Go figure!
• If you have a late payment history and pay off the entire balance, it does NOT clean up the late payments dings
• Credit history on a FICO score goes back 99 months (8¼ years for those with weak division skills)
• You can obtain 1 Free credit report per year per rating agency
• It takes 10 years for a bankruptcy to drop off and 7 years for adverse credit reports. Car loans and mortgages drop off in 4 years
• To rebuild credit get a gas card and/ or store charge, use it, but pay it off on time each month.