Credit Scores
Personal Debt Issues

Cashing in on your credit score

by Broderick Perkins

(4/23/2012) Your credit score is a numerical rendition of your credit report.

The higher your score, the less risk you post to lenders when it comes to defaulting on your mortgage.

Also, the higher your score, the better shot you have at landing a mortgage, but not just any old mortgage, a mortgage with the best rate, lowest points and other favorable terms.

That could mean a savings of thousands of dollars a year, and a lot more over the life of you loan.

Credit scores, unlike your credit report, are free only under certain circumstances.

Nevertheless, just as you should keep tabs on your credit report, you should pay the nominal fee, usually less than $15, depending upon the credit bureau, so that you know, well, the score.

If you know your credit score is low you can work on your credit report to bring the score up.

You didn't get your low score overnight, so don't expect it to rise overnight.

The three top things you can do to bring your score up are:

1. Pay your bills on time. Late payments drag your score down. If you are making payments late seek a non-profit counselor to help you budget your money and stop spending frivolously. Lenders see late payments as a sign you might default on a loan.

2. Pay down your debt. A lot of debt doesn't always mean you'll have a low score, provided you haven't maxed out your credit limits, but use credit sparingly.

3. Longevity. The longer you are in good standing with your credit use, the higher your score.

Here's how a low score can impact your cost of credit. Mouse over the graph below to enlarge it.