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Protect your credit score. Scores may range anywhere from 300-850: • Scores over 720 yield eligibility for the best rates that the market offers. • Scores under 700 are not quite as appealing to potential creditors, and may suffer slightly higher interest rates. • Scores in the lower 600's may face interest rates as high as double the interest rates granted to their counterparts with scores over 720 - if those consumers can even qualify to begin with, pay double the interest rates than one w/ 720 if they even qualify to begin with. Be aware of the factors incorporated your FICO score: • About 33% of your score is determined by your payment history, a combination of how often your cards have been payed on time and how often payments have been late, missed, or negotiated. • Another approximate 33% of your score is based on the total amount of your loans and other debt vs. available credit • 15% of your score is based on your age of credit, or the length of credit history reflected on your credit report. • 10% of your score is based on newly acquired credit, as well as recent credit inquiries. • Another 10% is based on what types of credit and loans are reflected in your credit history. Essential Tips • Most credit reports are found to reflect at least one error, so always keep abreast of the details on your own credit report - and contest any errors you find with your creditors as soon as possible, as rectifying them can take a while. • Resists the lure of the store credit card's opening day discounts. These cards usually have such exorbitant interest rates that revolving any balances tends to trump any savings you earned by signing up. In addition, because their credit limits are normally so miniscule, they make your credit card balance-to-limit ratio appear drastically unbalanced, which is reflected negatively in your credit score. • When deciding which debts to consider as priority to pay down first, keep in mind that one of the primary determining factors impacting your credit score is the card with the highest interest rate. So before giving in to the temptation to pay down the highest balance first just to get it out of the way, step back and reassess what actions will actually be best for your credit score, including the highest interest rates and the highest balance-to-limit ratio. Focus on paying down those priorities first, (while maintaining any other minimum payments, of course), then work your way down to paying off the cards with less impact. • Once credit cards are all paid off, you must also resist the temptation to shut them all down since the "age" of your credit history also plays a significant role in your credit score, and how appealing you appear when under consideration for new lines of credit. At the very least, you will want to keep the oldest credit card open to continue reflecting its payment history, your score's biggest determining factor. Closing all the others, however, can keep you from having as much available credit, which makes a more positive impact on your score.
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