What’s Your Score?

Your credit score is a three-digit number that reflects how well or poorly you’ve been using credit. It matters—a lot—because it affects how much you’ll pay for credit. MSN Money columnist Liz Pulliam Weston did the math and concluded that bad credit habits can cost someone as much as $200,000 more for credit over a lifetime.

The calculation is simple: A good score pays off in lower rates for future borrowing; a poor score means you’ll pay more for the privilege of borrowing, if you can borrow at all.

So it literally pays off to keep your score bright and shiny, or to restore its luster if it’s become tarnished. You’re in charge of your money management habits.

Polish your score:

• Pay your bills on time—Use online bill payment or automated transfer to make sure you never miss a due date.

• Pay down balances on all your cards—Chip away at all of them, even if it you can’t pay one or more off entirely. The key is to show steady progress. Two schools of thought: Pay off cards with high balances first, because they cost you more, or pay off small balances first, to achieve small successes that keep you focused on your goal. The truth is, use whichever strategy you can stick with. Just always pay at least the minimum on all of your obligations.

• Pay down overdue balances first—Creditors will report late payments to credit bureaus, and that will surely ding your score. So if you are not up to date on one or more cards, catch up now.

Tarnish your score:

• Miss payments—As above, a missed payment results in a report to the credit bureau, which in turn will result in a diminished score.

• Max out your credit limits—When you charge up to the limit on one or more of your cards, you raise what’s called your utilization ratio; your credit score will punish you for this. Say you have four cards, each with a $5,000 limit or a combined credit line of $20,000. Your goal is to maintain a utilization ratio of less than about 25%. So, in this example, try not to bump up to more than $1,250 on any single card, or $5,000 on all cards combined.

If you’re concerned about your credit eligibility, talk to a Hopewell Member Services Associate at 522-8311. We can help you identify strategies that will keep your borrowing costs low for a lifetime.


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