Your Credit Score Questions, Answered!

Credit scores: everyone has one, but what does it really mean? How do you know how to improve or hurt your credit score if you don’t understand the mechanics behind it? Here are your top credit score questions, answered!

How is my credit score calculated?

Your credit score is calculated by many different factors. Your FICO score factors are as follows:

Credit history 15%

Payment history 35%

Amounts owed 30%

New credit 10%

Types of credit used 10%

How much does credit really help/hurt you?

The answer depends on whether you are in need of credit. If you pay cash for things and aren’t applying for a rental, car loan, home or certain jobs then maybe credit doesn’t matter. However, your credit is checked when you apply for a loan (such as a personal loan, an auto loan or a mortgage), as well as when you apply for a new line of credit. Your credit score can not only affect your ability to get one of these loans, but will also help to determine the interest rate you will receive on that loan. A bad score can even affect your ability to get a job(some employers check your credit report before hiring–especially in the financial sector) just as a good score can help you to secure a loan at a better rate!

Is this the most important measurement as you apply for a mortgage, car loan, personal loan, credit card, etc. or is it just one of many and it really doesn’t have as much influence as you’d think?

It certainly is a way to measure loan pay back risks and is the best indicator available for lenders determine how risky of a borrower you are. Even though sometimes negative items on a credit report can be explained, the influenced nature of the credit report to a lender for any loan will be great.

How long does it take to repair a bad score?

That depends on what needs to be repaired. There really is no quick fix. Depending on whether there was a mistake on the report or a loan was paid off, getting a bad score fixed will take time.

What kind of circumstances can bring down a good score?

Things like; missing payments, applying for too many lines of credit at once, closing too many cards, ignoring a debt all have a negative impact on your credit score. Tax debts, having little available credit and your debt to available credit ratio also affect your score negatively. Other things that can negatively affect your score are repossessions and failure to pay your mortgage.

What are classic “silly” to make to avoid getting a bad score?

-Not paying bills on time, it is so easy to set up a debit or auto pay for the minimum each month so you don’t have to deal with missed payments.

-Ignoring a debt and letting it accumulate with interest and late fees until it brings your score right down with it!

-Also, opening too many lines of credit can lower your score.

What is the actual, likely difference in interest rates that you’d get for home loan, car loan, credit card interest, etc., for selected scores such as 650, 710, 740, 770 and 800? What are some handy-dandy tips/best practices for improving a low score and keeping it that way?

There is no way to estimate the difference in interest rates for varying scores. However, the higher the score the more likely you are to get the item at the best rate and terms. The lower the score more likely you may need a cosigner and you may pay a higher amount for the item. To improve a low score work on paying down your debt by paying your bills on time, keeping your balances and revolving debt down, and paying off debt rather than moving it around. Also try and limit the amount of credit accounts you apply for and open.

For more information, visit The Fair Credit Reporting Act.

Have another credit score question? Comment with your question below!
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2 comments

  • Hi,I am a 23 year old college student. A few years ago I got approved for 4 credit cards. I defaulted on them about 2-3 years ago after I lost my job. After that things went downhill academically, financially, and mentally. I am back in school now, and I have been doing good in my classes. I was served by three credit card company with a lawsuit. I showed up for one of them, made an agreement with the attorney and never paid him. I wasnt thinking. I got a judgement against me for around ~$4,900 dollars. Two other companies served me with lawsuits. I never showed up and I got two more judgements against me. One for ~$2,800 dollars, and the other one for ~$3,900 dollars. I got this third credit card company that hasnt taken me to court, and I have contacted them. They said my 2,000 credit card had accumilated interest and now its ~$7,500 dollars. They said they were willing to settle now for $2,000 dollars. I dont have this kind of cash now. I asked them now for 4 months. I am still dealing with them for a longer time. Now for my defaulted credit cards I realized, I made a serious error in judgement. I told them I can make monthly payments for it and they agreed. I tried to ask them to come down in the amount, they said they would with full payment. I dont have full payment. I feel like everything is hopeless. I dont own any property but I am self-employed with this bartending company and seldomly work. I’m overwhelmed so much that I can’t concentrate in my studies. I know school is important, and I need to figure out what to do.I have a few questions that have been bothering me immensely, so please bear with me. Its been past >thirty days since my judgements. Are these judgements reported on my credit report? If so, how negatively does it affect my credit? When does my credit report get removed from these judgements and is clean again? Am i able to do anything myself to have these removed earlier?Will my bad credit report affect me in getting a job after I graduate? After I have fully paid the creditors in full, what should I do so that no further action is taken against me. What are my long term consquences? Should I hire an attorney and have them help me?Thanks.

    • Jackie LePage Jackie LePage /

      Hi Otelia,

      Thank you so much for these great questions! Why don’t you give us a call so we can make sure we answer all of these questions for you? This way we can also keep it more confidential as well. You can reach our office at 631-470-8204.

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