WHAT DETERMINES MY CREDIT SCORE?

Credit Score Worry

If you haven’t already found out, your credit score can affect many aspects of your day-to-day living:

  • your car insurance monthly payment
  • whether you get approved to rent a house or not
  • your approval for a new VISA card
  • your monthly payment on a new home you want to purchase

Here at Red Roof Rentals, one of our stated screening criteria is that “… a credit score of 600 or more is preferred.” Less than that and your application will probably be denied, even if you are a good person, donate to the Red Cross and sing in the church choir!

In some sense, your credit score can be interpreted as a measure of your level of personal financial responsibility.

  • Do you pay your bills on time?
  • Do you owe too much on your bills?
  • Have you been sent to collections for failing to pay your bills?

To help in your understanding, here are some answers to frequently asked questions about credit reports and scores!

Q – If I pay CASH for everything, isn’t that the same as having good credit?

A – No. People that do this will have a credit report that gives their score as “N.A.”… presumably meaning None Available! This will NOT help you if you are needing a good credit score to get something done.

Q – So instead of paying CASH, what should I do to build a credit score?

A – I am not a professional credit counselor, but it seems to me that a good starting place would be to maybe apply for and obtain a gas station credit card, a VISA or MASTERCARD and perhaps a store credit card (Target, Walmart, etc). Then use them carefully according to the following guidelines:

  1. NEVER have a balance of more than 25% of your credit limit.
  2. ALWAYS make at least the requested minimum payment on time.
  3. DON’T open and close credit card accounts more than necessary.
  4. If you can’t make a payment, CALL THE CARD HOLDER and ask to make some sort of payment arrangement with them if they will agree not to report your delinquency to the credit companies. They may or may not agree to this, but it never hurts to ask!

Q – OK… but I already have credit cards AND I have a low credit score from not doing things right in the past with my finances. Now what can I do to IMPROVE MY CREDIT SCORE?

A – Again, though I am not trained in credit counseling, I suggest you consider the following:

  1. START LIVING RESPONSIBLY: Start by doing the 4 things listed above.
  2. FIX YOUR PAST MISTAKES: If you have a collection on your credit report, call the collection agent and NEGOTIATE WITH THEM what it would take to pay off what you owe… then PAY OFF THAT DEBT.
  3. PECK AWAY AT YOUR CREDIT PROBLEMS: Do the above on each and every collection shown on your report.
  4. DISCIPLINE YOURSELF: Do not to repeat your past mistakes where you charged more on your credit cards that you could possibly pay
    off. Pay on time, at least the minimum amount due, EVEN IF YOU HAVE TO BORROW FROM A FRIEND TO DO SO.

Q – By the way, how is my credit score determined?

A – Based on what we have read, here are the key factors affecting your credit score:

  • 35% – based on your history of making credit payments on time.
  • 30% – how much you owe compared to the maximum limit on your cards.
  • 15% – how many years you have had credit cards and accounts open.
  • 10% – any pattern of opening many new credit accounts in a short time.
  • 10% – Responsibly managing different types of credit accounts.

Clearly you can see that 65% OF YOUR CREDIT SCORE comes from your history of paying your bills ON TIME and not “MAXING OUT” your credit cards.

These are just some suggestions that we offer based on our experiences with credit reports and the practice of property management… and we recommend that you also consult with a CREDIT EXPERT for more complete and further correct information on the questions and answers brought up in this writing.

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