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Success F inan ce FINANCIAL CREDENTIALS Credit scores are an integral part of our lives, yet we don’t think of them until we need a loan. Many people don’t even know what goes into their score or how to improve it. The following are some helpful facts as well as some interesting trivia. T I P S BY S TAC Y W Y N N 1. 5. Good Credit: The available “space” on your credit cards helps to show credit-worthiness. Closing cards shrinks your credit “space.” Alternatively, requesting a limit increase can potentially boost your score, but not always. The 5 Factors: Payment history is 35% of the score. Amounts owed is 30%. Length of credit history is 15%. The credit mix (cards, loans, etc.) is 10%. And new credit counts for the remaining 10%. 2. New Credit: Even in today’s enlightened times, opening several new credit accounts in a short period of time can lower a score, especially for those with a short credit history. Older/Better: The age of your credit card accounts is an important factor in determining credit worthiness. Closing your oldest card can cause your score to drop. 6. 3. 7. 4. 8. Education Aside: Your degrees do not improve your credit score. Likewise, having a high school education or less does not detract from the score. Other Non-Factors: The balance in your bank accounts, stock, portfolio, employment status and/or your salary have no bearing on your credit score. 62 Job Privacy: The myth that employers can get your credit score is just that — a myth. They can, however, with your approval, get a specialized version of your credit report for employment screenings. Data Usage: While car insurance companies don’t use your credit score to help determine your insurance rates, over 90% of insurers use a credit-based auto insurance score when considering insurability. 9. Married/Divorced: After a 15-year study, the Federal Reserve discovered that couples with widely varied individual credit scores in the beginning of the relationship were more likely to separate. 10. The 1950s: Credit scores didn’t exist until the mid-20th Century. Prior to that, one would sit down with a banker directly in a very varied, subjective, difficult loan process. 11. Zero Score: No credit score? Never fear, you can still get a mortgage through “manual underwriting” which takes into account assets, bills and your overall financial health. 12. Other Scores: Banking matters are tracked as well, via TeleCheck, ChexSystems, and EWS which help determine things such as whether or not you should be allowed to open a checking account.