Halloween Is Not Time To Be Scared Of Credit Scores

Credit scores are important to Massachusetts legal consumers. Why? They have an effect on your ability to get good interest rates on vehicle loans, personal loans and home mortgages. They can even have an effect on getting hired for a job. However, in a recent Visa credit card study, a large percentage of those surveyed believed that age, race, language and gender factored into someone’s credit score. None of those attributes are a factor in determining credit score. Nor do address, assets, or employment history factor in to one’s credit score. Another misunderstood factor is when creditors take a credit counseling class.

This does not have an adverse effect on one’s credit score. So while there may be a need to be afraid of Salem witches and goblins this Halloween, there is no need to be afraid of working on your credit score: all factors that go into your score can be changed.
In fact, 25% of those surveyed believed that their address, or the town where they lived, would have an impact on a credit score. Over 38% believe that age is a factor in the credit score. 21% thought that ones ability to speak English had an effect on credit scores. Almost 16% felt that race was a factor. A full 60% of those surveyed believed that employment history was a player in credit scoring. 53% believed that their assets and savings were a credit score factor. None of these factor into credit scores.
While loan applications may ask for some of the information above, your credit score is not determined by any of the above. This is critical because Massachusetts consumers need to know that working on improving their credit score is possible. Improving your score could lead to getting that better rate on a mortgage or other loan.
Credit scores, as we have reported on before in our Boston bankruptcy blog and in our Massachusetts bankruptcy website information, are determined by the following factors: 35% on payment history, which includes payments on credit cards, loans, mortgages, car loans, and also bankruptcies, judgments, and other court related credit information; 30% on the amount you owe on credit accounts, including how far maxed out you are on your accounts such as credit card limits and home equity lines; 15% on the length of your credit history, which includes the time you have owned various credit cards and the activity on those cards; 10% on new credit, including the number of new accounts and new inquires as to your credit; and 10% on the types of credit used, that is auto loans verses mortgages verses credit card use.
The Visa survey found that 42% of Americans did not ever review their credit scores. So, perhaps it’s time for some to go to www.annualcreditreport.com and request your score. Check for mistakes. Write to the credit reporting agencies to correct those mistakes. It could make a huge difference in the amount you pay in interest on your next vehicle loan or mortgage refinance.
Finally, keep in mind that the easiest ways to improve your Massachusetts credit score are 1. Pay your bills on time; 2. Pay down credit card debt, of course the cards with the highest interest rates first; 3. Don’t max out your available credit as this has an adverse effect on the reporting agencies’ algorithms, which like a debt to credit ratio of less than 35%. It may be hard work but it’s not scary if you have the information you need to work on your credit score.