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Excellent credit score tougher to attain
NEW YORK (1/28/09)--Experts warn that to get the best rates in these tough economic times, you need a credit score--a three-digit number that reflects your creditworthiness--of 760 or higher. Previously, that number was around 720 ( Jan. 22). The credit crunch is putting the squeeze on your credit score, and one tiny slip-up on your part could come back to haunt you—possibly costing you thousands of dollars over the life of a loan (Kiplinger’s February). Tighter credit standards mean new rules for consumers. Take car buying, for example. No-money-down deals are difficult to land if your credit score is less than around 720 ( Jan. 16). You may have to ante up at least 10% to 20% of the price, or take on a shorter loan period; six- and seven-year loans are hard to find and getting pricier as the recession deepens. The upside of shorter loans, though, is you’ll pay less interest. How can you boost your credit score?
* Pay all bills on time. Responsible bill payment makes up about 35% of your credit score. * Ease up on “charge-its.” Big balances will hurt your score. Keep balances less than 25% of your available limit. Track charges with a check register, or check account balances frequently online. The total amount you owe makes up about 35% of your credit score. * Keep--and use--old cards. The older and more established your credit history, the better. If you lose or don’t use old cards, some issuers stop updating those accounts with credit bureaus or don’t give as much weight to them. Charging even a small amount every few months will help boost your score as long as you pay on time. Length of credit history makes up about 15% of your score. Another reason to use old accounts now and then is that some card issuers are charging inactivity fees. * Follow up on goofs. If you slipped up once and paid late, but otherwise have been a good customer, write and ask that the ding be deleted from your file. It’s worth the time and effort to solicit a “goodwill adjustment.” * Mix up your credit. By having, say, a mortgage, a credit card or two, a personal loan, and a charge card, this “mix” sends a signal to lenders that you can handle credit responsibly. Having a mix of credit makes up about 10% of your score. * Watch those new-credit offers. If you’re about to apply for a mortgage or other form of credit, don’t open a flurry of new accounts. Too many inquiries--except those batched together while you’re shopping for, say, an auto loan within a few weeks’ time--can hurt your score. Keeping new-credit requests to a minimum accounts for about 10% of your score.
Experts note that trying to boost an already-high credit score won’t have much of an impact, particularly if your score is 760 or higher. Once you hit that mark, you’re already getting the best rates available. For more information, read “Act Quickly to Correct Credit Report Errors” in Home & Family Finance Resource Center.
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