Credit Scores More Important Than Ever for Best U.S. Loan Rates

Keeping your credit score up or repairing bad credit is more important than ever in a bad economic environment.

Bloomberg published a good article today on consumer credit scores and how keeping a high score was important in getting the best rates.  Here are some key nuggets of wisdom from the article on how difference credit activities impact your score.

  • Payment history accounts for 35 percent of the total score, outstanding debt is 30 percent, and the length of credit history is 15 percent, according to MyFico.com. New credit and types of credit used each account for 10 percent of the total.
  • The debit to credit limit ration, or the percent of your credit limit that you have used should be below 30%.  Higher and your credit score can suffer.  If you have muliple cards it's better to spread your balance amongst these cards then have it all on one card.
  • Having more cards and managing them responsibly actually helps your credit score.  It shows lenders that you can manage credit.
  • A 724 score is considered good credit.  Allowing one account to become 30 days' past due lowers the score to 678 while allowing all of your accounts to become 90-days' past due lowers your score to 660.  These results were modeled by Credit Karma's credit simulator, which predicts how any one of 14 financial transactions affects credit.
  • Regular spending patterns are important.  Credit card companies monitor your spending and if they see a big purchase or a change in your habits that can change your score.
  • Avoid mass opening and closing credit cards.  This is also partially true for deposit products.  As our research revealed, opening a slew of checking or savings accounts in a short period of time can have an impact on your credit score.

Most of all, be responsible, pay on-time and don't run up your credit card bill.  Common sense will take you a long way in keeping your credit score high.

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