ROCKVILLE, Md., (WUSA) -- When you check your credit record at one of the credit bureaus does it affect your credit score? Should you close those credit card accounts that you aren't using in order to improve your score?
What are the factors that make up a credit score?
The most important factor is your payment history. This includes whether you have paid your bills on time, if you were late in making payments, missed payments or filed for bankruptcy or went through foreclosure or other negative events. Also, the amount you owe is very important. The more positive factors you have, the better your credit score. Recent items are more important than older ones. Even though the negative items will usually stay in your credit record for seven years, the older the negative, the less the weight it has in determining your credit score.
Does salary and age make a difference in your credit score?
It will probably come as a surprise to some people, but salary isn't usually a part of the formula for arriving at a credit score. However, it may be considered by a lender when you apply for a loan. The important thing is how you use your credit. In fact, salary is only one thing that is considered when you apply for credit. While age is not part of the scoring model the length of your credit history is a factor.
Are there things you can do to improve your credit score?
Yes, the most important thing is to pay your bills on time. Delinquent payments can have a major negative impact on your score, particularly, if the account goes to collection. Since the amount of debt is important, try to keep a lid on credit card debt and other revolving accounts.
I just received an email from a viewer who had several credit cards that he no longer used and wanted to know if closing those accounts would raise his scores. The short answer is "No". In the past, the thinking was that the less credit cards the better. Well, that philosophy no longer prevails.
While this may sound strange, it does have some logic behind it. Credit issuers are more concerned about how you use the credit you have available. For example, if you have a number of credit cards but keep the balances low, that will be less of a negative than if you have one credit card and have nearly reached the credit limit. However, don't open a number of new credit cards just to increase your score because that approach could backfire. Having no credit cards can be a negative. Go figure!
How important is checking your credit score?
Very important, because you have to keep track of the items in your credit record to be sure they are accurate. For example, there might be an old account that went to collection but it has passed the time where it should be removed. You should challenge it with the credit bureau. The same is true for inaccurate information about your accounts. In addition, there may be items that don't belong to you.
Since we are now entitled to free annual credit reports from each of the three credit bureaus, are credit scores included?
No, you can purchase credit scores from a variety of sources, but they are not part of the free reports. To get your free credit reports go to www.annualcreditreport.com. In addition to the annual reports, there are some other circumstances where you can get a free credit report such as when you a denied credit. The free reports do not include your credit score.
Does checking my credit record affect my credit score?
There seems to be a myth circulating that your credit score is adversely affected when you get one fo the free credit reports. Not so! However, inquiries from companies where you have applied for credit can bring your credit score down a few points. This is particularly true if you apply for more than one line of credit at once.
Is there a standard scoring range for determining a person's credit worthiness?
While the FICO score is widely used there are a number of other scoring models that use different ranges. For example, on one model a score of 700 may be excellent and on another it may be only average or slightly below. The important thing is that you know the range of the model being used so you get a clear picture of your score.
Written by Shirley Rooker
Director, WUSA 9 Call For Action