Financial Readiness

Credit: Building and Repairing

Your credit score, or FICO score, affects approvals for a loan and interest rates, cell phones, apartments, auto insurance rates, and much more. See the following example on a 30-year fixed mortgage interest rate on a home loan of $200,000 (source).

Credit Score Interest Rate Monthy Payment

Total Interest

760-850 4.096% $966 $147,736
700-759 4.318% $992 $157,069
680-699 4.495% $1,013 $164,600
660-679 4.709% $1,038 $173,809
640-659 5.139% $1,091 $192,651
620-639 5.685% $1,159 $217,204

The percentages below reflect how your credit score is calculated. Events stay on your credit report for seven years.

  • (35%) Pay ALL your bills on time (not just credit cards). If you cannot at least pay the minimum, contact your creditor and determine you best option. If you cannot pay all of your bills, pay the bills that have been overdue the longest (the longer a payment is due, the more it hurts your credit). Once an account has been back in good standing for a while, ask a lender to erase late payments.
  • (30%) Reduce each balance, and all balances collectively, on credit accounts to 10% or less of your available credit, or ask your creditor for an increase in the available credit amount. The lower your debt utilization is, the better your score will be.
  • (15%) Keep old credit accounts and use them, because history is important. Keep in mind, cutting up a card does not cancel the account. Having and using 2-5 revolving credit accounts is usually recommended. Even a small charge and paying it off counts as an on-time payment. Consider spreading your purchases over multiple credit cards.
  • (10%) Keep inquiries to your credit to a minimum. Each inquiry has a negative impact for a short period.
  • (10%) Having a mix of credit, both revolving (i.e. credit cards) and installment (i.e. auto loan, mortgage) can also boost your score.
  • Other factors creditors consider: length of time at present address, length of time and stability of job, if you are a renter vs. homeowner, amount in savings/retirement accounts, stocks and other holdings, income, and debts.

Other tips: 1) Enroll in Auto-Pay or set up payment reminders. 2) If you don’t qualify for a regular credit card, consider a secured credit card.

Credit Reports: You can obtain three free credit reports (one from each bureau) every 12 months from www.annualcreditreport.com. If you want your credit score, this will cost extra. Requesting your own credit report has no impact on your credit score. If you find an error, use this sample Dispute Letter (sent certified mail for documentation). Need credit counseling? Visit www.nfcc.org or www.cccsstl.org.


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