Village Tip: Improve Your Credit Score

Many villagers have no idea what their credit score is. A credit score is a number that is used to predict how likely you are to pay back a loan. Your credit score starts with the information about you from your credit report. A mathematical formula – called a scoring model – is then used to create your credit score.

You can get a free copy of your credit report at www.AnnualCreditReport.com. The information in your credit report influences your credit score. Unlike your credit report, which you can get at no cost to you, you usually have to pay for your credit score. There are certain instances in which you are entitled to your credit score for free, for example if you are denied a loan on the basis of your credit score.

Studies show that the average person could save about $80 a year on interest by raising their credit score by just 30 points. Here are some ways to improve your credit score:

1. Pay more than the minimum payment so your balance doesn't build up.
2. Pay bills on time. If you have been late, paying on time for six to nine months can raise your score. One way to make sure your payments are on time is to set up automatic payments, or set up electronic reminders.
3. Don't borrow the maximum on any one card, even if there is a low-interest offer. If you ave card with $10,000 in available credit, don't owe more than $6,000. Credit scoring models look at how close you are to being 'maxed out', so try to keep your balances low in proportion to your overall credit limit.
4. Don't open two or three new cards within a couple of months. This will lower your score.
5. A long credit history will help your score. Credit scores are based on experience over time. The more experience you have with getting credit and paying your bills on time, the more information there is to determine whether you are a good credit risk.

A credit score of 730 or more will get you favorable rates on credit cards, auto loans and mortgages.