Personal credit scores are at the heart of the U.S. economy and are used as a basis for lenders to determine who they will lend to and who they will not lend to. The scores were adopted in the 1960s by FICO (Fair Issue Corp.) as a way of alerting lenders of potential client risks. One of the elements of the score is based on your payment history and this one aspect alone can weaken your credit score faster than anything else. However, your credit report is only valid for 24 months prior to the date that someone is checking into it. After that period of time your bad payment history will fall away and you get to start again.  

Interestingly enough in the state of Missouri we were surprised to find that everything revolves around your credit score from the amount you will be charged for car insurance to the interest rate that you can negotiate on a loan. We had no idea of the significance of our score until we arrived to apply for our home loan, with personal info out the kazoo for everything from income and assets to expenses, only to find that the bank didn’t need them. The only thing that mattered to them was our credit score. Credit scores can range from 300 to 850. 

One thing that amazed us is that despite a past bankruptcy incurred due to a divorce  no one took any notice of the ding on our credit and since our credit since then was exemplary and it was over ten years old we were treated as if we had never been forced to file. So how does one repair bad credit or attain new credit?  First one must realize that gaining credit is largely a numbers game and consumers can use some common sense guidelines to improve their creditworthiness. When studying your credit report, according to Mike Cherry, president of Consumer Credit Counseling Services in Springfield, MO. you need to be aware that the report carries only your last two years of credit history. Therefore “if you start paying your bills on time today, and you haven’t been for a year, in 24 months, that bad payment history will fall away”. 

Another important thing that is looked at for the determination of about 30 percent of your credit score is your debt-to-credit ratio. That is the amount of debt a person has compared to their total credit limits on all revolving credit. To improve your score you must make timely payments but that is not all. Marita Thomas, vice president of commercial lending for Empire Bank says that you should “make sure that the outstanding debt on your revolving lines of credit is 50% or less.” She also added that “if you’re maxed out on credit cards, you’ll probably be over when the interest is added at the end of the month – and that carries a lot of weight.” 

Other considered factors in the determination of your credit score include the number of active accounts that you have  (too many accounts can be detrimental and account for about 15% of your credit score) and the length of credit history (the longer your credit history the better and be advised that the number of active accounts weighs in for about 10 percent of your score.  If you are unaware of your credit score you can check your score annually, for free, at www.annualcreditreport.com . At this web address you can check the three most commonly used credit bureaus records on yourself. If you find discrepancies or errors you can then contact the bureaus to remedy them.  Good luck and I hope you find this information helpful.[tags]FICO, FICO score, credit score, Credit reporting, credit, free credit report, payment history, bankruptcy, payment records, home loans, auto insurance[/tags]