Your Credit Score

What is this score you hear so much about? And how can one number have so much power? Understanding the facts about credit scores will help you make choices that will protect your options in the long run.

First, know what a credit score is. It is a mathematical risk assessment based on the information available in your credit report. It does not factor in such information as income, employment, age, sex, and race.

If you are in the market for a home or car loan, a high score is important, as lenders will look to it to assess their risk in lending you money. The same goes if you are looking for a credit card with a low interest rate. Even potential landlords may look at your credit score to help them determine their risk in renting to you. Though you may not be in the market for a loan or home now, you never know what the future holds. Keeping your score as high as possible is usually a good idea.

A common scoring model is one developed by Fair, Isaac and Company. They issue a FICO score, which is based on many factors. Five of these factors are significant and within your power to control. They are (in order of greatest weight) payment history, amounts owed, length of credit history, pursuit of new credit, and types of credit in use.

  • If your score isn't where you want it to be, the good news is that you can take steps to improve it.
  • Obtain copies of your credit report from all three major credit reporting agencies to check for and correct errors.
  • Pay down your debt. If you can't pay the total balance each month, pay more than the minimum required payment.
  • Pay on time, every time.
  • Avoid aggressively transferring balances to new cards.
  • Keep your credit card balances well under the maximum available limit.
  • Only apply for and have the credit you need.
  • Repay collection accounts, judgments, and liens.

Recent information matters most – so the faster you do all the right things, the faster you can repair damage. And avoid "credit repair clinics," as they can't do anything you can't do for yourself for free.

Keep in mind that you can’t build credit without using it. Having several (two to four is a good rule of thumb) active credit instruments shows capacity and responsibility. Balance is key. Too many unused open accounts shows potential for high future debt, which can lower your score, while too few accounts can also have a negative impact because you won’t have a long history of responsible credit use.

How to Establish Credit

Once, credit cards were only for the privileged few. The rest of us used cash - and when there was no more, we either had to borrow from a friend or family member, or make do until next payday. Today, qualifying for a credit card is easier then before. Establishing a positive credit record, however, requires dedication and patience.

Whether you are new to credit or are trying to "clean up" past mistakes to reestablish a favorable record, you may encounter a frustrating paradox: you must have and use credit to create a credit history, yet many financial institutions are reluctant to extend credit to someone without an established record. But don't despair - there are several good remedies for both situations.

An excellent start is a secured credit card. You are granted a credit line based on a percentage of a cash deposit you make to your financial institution. Because deposits are usually low, so too will be your credit limit. Application and annual fees for secured cards are often higher than those associated with unsecured credit cards.

Consider a local retailer's credit card. Their criteria are often less rigorous then larger credit issuers. Be sure they subscribe to the major credit reporting agencies though - if not, you won't be establishing a credit history.

Another option is having someone with a positive credit record cosign an account for you. This requires a great deal of trust on the part of the cosigner - if you fail to pay, he or she is responsible. You could end up jeopardizing a relationship as well as a credit record.

Finally, if you have damaged credit, you'll need to rectify the past as you're building your future. Pay old debts and correct errors as soon as possible.

Getting Your Free Credit Report

The three credit bureaus have established one central website, telephone number, and mailing address to use for ordering your report. The credit bureaus will only be providing the free annual reports through this central location, not through their individual websites, telephone numbers, or addresses.


Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

You can get a free report from each of the three bureaus once every 12 months. You can get them all at once, or stagger your requests throughout the year. If you request the report on-line, you should be able to view it immediately. Requests via telephone or mail will take approximately 15 days for processing.

Beware of Free Credit Report Scams

Unfortunately, with this opportunity to fight identity theft, there is a new opportunity for fraud. The Annual Credit Report Request Service is the only authorized source for your free annual credit report from the three major bureaus. Neither the Annual Credit Report Request Service nor the bureaus will send emails requesting your personal information. If you get an email or see a pop-up ad that claims to be affiliated with the Annual Credit Report Request Service or, do not reply or click on any link in the message - it's probably a scam.

Other Free Reports

You have the right to request a free credit report directly from the credit bureaus under certain circumstances. These additional reports are not available through the Annual Credit Report Request Service. You may be eligible for free reports if:

  • You have been denied credit, housing, employment, or insurance based on the information in your credit report within the last 60 days (from the bureau that supplied the information)
  • Adverse action was taken against you based on information contained in your credit report You certify that you are unemployed and plan to seek employment within 60 days (one free report every 12 months)
  • You certify that you are receiving public benefits (one free report every 12 months)
  • Your report is inaccurate due to fraud (one free report every 12 months)

Contacting the Bureaus

Equifax: 800.685.1111 |

Experian: 888.397.3742 |

Trans Union: 800.916.8800 |