SEPTEMBER/OCTOBER 2015
Know Your Credit Score
Focus on improving low range
by Angela S.
Hoover, Staff
Writer
Your credit score
indicates to lenders your ability to repay a loan
– your credit worthiness. It is
also called the FICO (Fair Isaac
Corporation) score range.
FICO scores range from 300
(worst) to 850 (best). The number can determine your ability to
get a loan or credit card, whether
you need to pay a deposit on
utilities, if you can rent an apartment and your interest rate for a
mortgage or auto loan. In some
industries, it can also decide
whether you’re offered a job you
applied for.
Credit scores are determined
by a formula FICO created. Factors used in the formula include
your payment history, how long
you have had open lines of credit
and whether you had late payments on accounts. Each of these
factors are weighed differently:
• 35 percent of your score is
based on payment history and
late or delinquent payments;
• 30 percent depends on how
much you owe and your debt
utilization ratio – how much
you owe compared to your
overall credit limit;
• 15 percent accounts for the
age of open accounts you still
owe money on;
• 10 percent considers new
credit, including recent credit
checks, new accounts opened
and if you had bad credit in
the past; and
• 10 percent depends on the
types of credit you use: credit
card debt, student loan debt,
etc.
You are entitled to one free
credit report a year. To see your
FICO score for free, sign up at
either TransUnion or www.GoFreeCredit.com and then cancel
after the grace period. The TransUnion monthly fee is $19.95
with a seven-day grace period.
The GoFreeCredit.com monthly
fee is $16.95 with a 30-day grace
period. If you do not cancel the
account before the grace period,
these companies will monitor
your credit score for any changes.
This is what the different FICO
score ranges mean:
• 300-579: This is the “bad”
credit category. Reasons
include late payments, filing
for bankruptcy or having no
established credit. In this
range, getting a credit card
will be near impossible and if
you do get one, you will have
a higher interest rate or fees.
If your credit score is in this
range, concentrate on rebuilding your credit. One way to
do so is to take out a secured
credit card, which requires an
upfront deposit.
• 580-629: This is the “poor”
credit range. With a score in
this range, you may be able
to get an unsecured credit
card but it won’t have a very
high limit or many rewards.
Focus on raising your score
with a good payment history, and don’t apply for too
many credit cards around the
same time. Too many credit
inquiries or too many recently
opened accounts at the same
time can decrease your score.
• 630-689: This is the “fair”
credit range. If you have a
score in this range, it’s probably due to the type of debt
you have. There is “good”
debt, such as mortgages and
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student loans, and “bad” debt,
such as credit cards. Keep
your debt utilization ratio low
and don’t borrow too much.
Also, don’t close old accounts
unless keeping them open
requires hefty annual fees.
• 690-749: This range is “good”
credit range. With a good
credit rating, you should
qualify for most cards with
low interest rates and lots of
rewards. If you regularly carry
a balance month to month,
try to get a credit card with a
low interest rate.
• 750-850: This is the “excellent” credit range. With a
score in this range, you can
receive the lowest interest
rates, highest credit limits and
best rewards.
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