Credit scores are important. Lenders use them to decide whether to give you credit. Landlords, utility companies, and employers all use credit 
scores to determine your reliability and trustworthiness.
The FICO® score, developed by Fair Isaac Corporation in Minneapolis, is the most commonly used credit scoring system. FICO scores range from 300 to 850. Many lenders consider a score in the 700s to be good. Your FICO score is comprised of five factors:
- Payment history
- Amounts owed
- Length of credit history
- New credit
- Type of credit in use
How do individual actions impact your score? Here is a sampling from the Micro Business Development Program at Capstone Community Action. The impacts below are estimates only.
While paying at a national discount store, you are offered 15% off your total purchase if you apply for the store’s credit card today. You do!
Credit Score Impact: -8
You co-signed for your daughter’s automobile loan. She is 60 days late paying.
Credit Score Impact (to you): -60
Your daughter catches up on her auto loan payments and you pay all your bills and loans on time:
Credit Score Impact (to you): +30
It is time for a new car. You go loan shopping over the next few weeks which results in several inquiries to your credit reports.
Credit Score Impact: 0
You no longer use the credit card you opened while in college and close the account.
Credit Score Impact: -15
There is a loss of a job in your family. To make ends meet, over the past two months you have run up your two credit cards to their credit limits.
Credit Score Impact: -80
You continue to struggle to make ends meet. You miss payments on your maxed-out credit cards. You are late with your mortgage payment.
Credit Score Impact: -100
Good news! You have a new job and have started making payments. Within three months your mortgage payments are current and you bring the balances on your credit cards down to 50 percent of the available credit limit.
Credit Score Impact: +40
You get a notice from your library that you still owe $47.98 in late fines and this debt has gone to collections.
Credit Score Impact: 0
Under FICO 08, collection accounts for accounts less than $100 are not supposed to impact your credit score.
According to FICO, three things you can do right now to repair your credit and improve your score are:
- Check your credit report for accuracy and dispute any errors with the credit bureau from which you obtained the report
- Use payment reminders to help pay your bills on time.
- Reduce the amount of debt you owe. If you have high credit card debt, stop using the cards and set up a plan to pay it off.
For more tips on raising your credit score, visit http://www.myfico.com/.
