A credit score is a number that is talked a lot about these days. The higher your score, the better chance you have of getting a better interest rate on loans. Your score even affects job hunting, since potential employers often check your credit history.
Valerie RumboughIt is important to understand how the credit scoring process works. The score that lenders and others look at is your FICO score, created by the Fair Isaac Corporation. It measures your creditworthiness numerically, with a range from 400 to 850. Note that there are other credit score measurements out there, but FICO is the standard.
In the past, a score above 720 was considered great, and worthy of the best interest rates for loans. However, in this economy, lenders have become increasingly more selective in who they consider credit worthy. Now, you may not qualify for the best rates unless you have a score of 760 or better.
How is your score calculated? There are five areas to watch: how much debt you have, your payment history, the ratio of debt to available credit, the type of credit you have, and the length of time you have had credit.
Keeping these things in balance is of utmost importance. The next article will discuss specific things that will both help and hurt your score. Remember, though, that your credit score is not only a reflection of your financial character, it is also a reflection of your Christian character.
Rumbough, CPA, CFP, is chief operations officer with the Baptist Foundation of South Carolina. Contact her at 800-723-7242. In accordance with IRS Circular 230, any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.