What is A Credit Score

Credit is the amount of money a lender will allow you to borrow based on your income, current debt situation and your past payment history.

Credit bureaus calculate your credit score from the information contained in your credit report. The most widely used score is called a FICO score and is used by the major credit repositories. It is based off your current debts, balances and payment history. This includes mortgages, credit cards, auto loans, liens and/or bankruptcies. Lenders use it as an important tool in deciding if they will lend you money and at what rate. A Credit score can range from 400-850.

Generally if your credit score is over 700 you have good credit. Under that, and you may pay a higher interest rate to borrow money.

All of the following will negatively impact your credit score; late payments, maxed out credit cards, liens, judgements, foreclosure, collection accounts, bankruptcy, credit counseling

The best thing you can do if any of these happen, is to start paying all bills on time, pay off a credit card to a balance of 0, and if the collection account activity date up until now plus the time it will take you to pay it off is less than 7 years, pay it off. Old collection accounts will move off your report after 7 years, so sometimes it is better to leave it alone if you have other debt that needs to be paid. If you have the money and can pay it all off immediately or quickly (within a year), then it will help your score most as soon as it show as a paid collection account.

The worst thing for a credit score is a 60 or 90 day late mortgage payment, foreclosure, and/or bankruptcy

Do not pay your mortgage late. Pay anything else late before this.

Some credit bureaus offer a free credit score with the purchase of a credit report. Some offer 3 free credit score(s) with the purchase of a 3 credit bureau report.