May 18, 2009 10:43 pm US/Central
Why Your Credit Score Counts And How To Raise It
CHICAGO (CBS) ―
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Willie Wright's score had been over 800. But in December 2008, it was down to 685, leaving her in shock.
CBS
Where your finances are concerned, the most important number you need to know is your credit score. Scores range from 300 to 850 and you want to be as close to 850 as possible.
CBS 2's Dorothy Tucker reports on why we need to boost our scores and how to do it.
Even when you rent apartments these days, people want to look at your credit – which is why Willie Wright is almost fanatical about checking her credit score on
myFICO.com.
She knows that whether you're renting an apartment, buying a house or a car, the higher your credit score the lower your interest rate, which saves you money.
For example, buy a $200,000 home and a credit score of 630 can get you an interest rate of 6.1 percent. That's a monthly payment of about $1,200. But a score over 760 means a 4.5 interest rate, and that drops your payment to $1,000 and puts $200 in your pocket.
Wright's score had been over 800. But in December 2008, it was down to 685, leaving her in shock.
So, she immediately checked her credit report for mistakes and found three, companies saying she was delinquent on accounts she never had.
"This is not me," Wright said. "That's all I could think."
She filed an
online dispute with the TransUnion credit bureau. The company investigated, concluded Wright was right, and deleted the accounts. Her FICO score shot up 144 points to 829 in just 10 days.
"I was still a little amazed that they moved so fast," Wright said.
At 483, Twanna Floyd's credit score is 483, near the bottom of the credit score chart. She's seeking help from the Near Westside Community Development Corporation.
Floyd's counselor said she had 69 late payments and suggested she pay her bills on time every month. Unlike Wright, Floyd won't see a quick jump from those changes; it could take a year.
"If you have a good history for that period of time you're gonna see significant improvements in your credit score," said credit expert Karen Chan of UIC.
Tucker discovered a few more tips on raising your score when she checked hers. At 770 it's not bad, but what was hurting her score was too many credit accounts. Thirty-five to be exact.
She, like many, is guilty of signing up for new credit to get a store discount.
"From a lender's point of view you look like you're becoming credit hungry," Steve Katz of TransUnion said.
To raise her score, she needed to reduce my accounts. So she went online and had TransUnion delete some old accounts.
Just by removing seven, her score jumped 15 points to 785, and it only took one day.
She checked her score again and this time there were too man accounts with balances. The solution? Dispute questionable accounts. There were three, including a $59,000 balance that was actually a duplicate and two incorrect late payments.
With all three corrected her score rose another 14 points to 799. Not as high as Willie's 829 but high enough to save plenty of money.
Get your free annual credit report at
www.annualcreditreport.com or by calling (877) 322-8228.
Get tips on getting through tough financial times from spending, credit and foreclosure at
http://web.extension.uiuc.edu/toughtimes/
And
click here for credit card smart sheets on getting rid of credit card debt, protecting your credit information, building a new credit record and much more.
(© MMX, CBS Broadcasting Inc. All Rights Reserved.)
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