April 10,2009
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Credit Score Navigation, Pt.2
You're at the helm and here's your compass.What's the easiest way to boost your credit card score?:
Besides frequent responsible credit card spending, maintaining an optimum U:R (utilization ratio) will steadily better your score. If you maintain spending so that your balance always remains within the range of 10% to 30% of your limit, you will find favor with your credit card lender. This is not advise to creating finance charges every month just to gain favor. That would be foolish. It's fine to pay your balance each month. It's generally not good, however, to only ever pay the minimum each month. Remember, your monthly finance charge is 1/12 of your APR so, if your APR is 12%, then your finance charge will be 1%. With minimums of only 2%, only half of your payments will ever pay against the debt. With an APR of 24%, you would pay until you die and still owe the same amount as you did from the start, never having reduced your debt by a penny.What's the quickest and easiest way to whack your credit card score?:
Missing a credit card payment or charging over your limit. You can easily fall 100 points a month that way. In fact, word is out that lending banks are now using the tactic of allowing overcharges to easily go through so they can slam consumers with high interest and steep penalties. It's not that they're being mean...just, not being kind. After all, they shouldn't have to baby-sit us. They're trying to weed out the unstable and only keep responsible customers.What do the credit score people look for?:
The current Components that are used to determine your score today are:
> Payment history (35%): This is the biggie. Always pay steady and never be late.
> Amounts owed (30%): Remember the U:R? Keep you balance between 10% and 30% of your limit. Don't risk high chargers during the month, then paying them down when the statement comes. That doesn't work.
> Length of credit history (15%): Good reason to keep credit cards. Nothing's better than have 20 years of good credit standing.
> New credit (10%): Young credit card accounts just don't give very much predictability.
> Types of credit used (10%): Credit cards from major lenders are more trusted. Car loans and mortgages also add more credibility, if they're kept in good standing.