1. What is considered a good credit score?
Unfortunately, there isn’t just one credit score because there are several credit reporting agencies, each with their own scoring model and number range. Some go as high as 990, but the scoring system used by FICO (the Fair Isaac Corporation) is most popular. FICO scores range from 300-850 and a 680 is considered good and above 720 an excellent credit score.

2. Will paying off debt and closing credit cards help my score?
Yes and no. While it’s always prudent to manage your debt and pay down your balances, if you close a card that has a high available balance but low debt, has a long, good history of on-time payments, etc., then it may hurt your credit. By closing it down you’d basically be erasing a positive factor on your credit, so be careful which accounts and cards you close.

3. I’ve had my credit pulled several times while shopping for a loan. Will that hurt my score?
The credit bureaus understand they you’ll want to “shop around” for the best mortgage or auto loan or credit card, and that means your credit will be pulled several times. The good news is that they usually just count this group or batch of inquiries as one if they’re within a 30-day period. So try to contain them to within a 30-day period, but avoid multiple credit pulls on different kinds of debt that display financial desperation or risk or there could be a small score drop.

4. What is the ideal debt ratio to get the best credit score?
Like we mentioned, credit utilization is a major factor in calculating your credit, affecting about 30% of your final score. As a general rule, you’re advised to keep all of your account balances and revolving debts at or below 30% of your available credit. But that’s just the start, as studies show that you’ll want a credit utilization ratio of 10% or less to achieve a credit score in the high 700’s or even over 800.

5. So what factors determine my credit score?
Your score is calculated based on these factors:

30% Credit utilization.
We covered credit utilization, which is your ratio of debt.

35% Payment history.
Keeping a track record of paying on time is the most important factor.

10% Mix of credit.
A good mix of quality revolving accounts, mortgage debt, and installment debt, etc.

10% New credit.
Opening new accounts and new accounts deemed risky can lower your score.

15% Length of credit history.
The longer your accounts show a positive payment and use history, the better it reflects on your score.

6. How Will a Late Payment Hurt My Credit Score?
You want to avoid late payments at all costs since 35% of your credit score is based on your payment history. If you pay late, your score will drop anywhere from 80-100 points typically. But what you definitely want to stay away form is a 90-day late, which will cause real, lasting damage to your score.

7. If I am married or a cosigner on a loan and the other person defaults,
Different states have different rules when it comes to assuming debt responsibility when you are married. The “community property states” where you are responsible for your partner’s debts accrued during marriage include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Even if you get divorced, you’re both on the hook for the debt.

It’s the same whenever you become a co-signer on a loan for someone else. You assume the responsibility to pay the debt. If the other person fails to pay or even misses a payment, your credit score will go down and the creditor will pursue you, as well, to repay the debt. The lesson is to be very careful who you are co-signing for (or marrying!)

8. What does FICO mean?
People sometimes get confused as to the different entities that are involved with your credit reporting and scoring, so we’ll clear it up here. FICO is the Fair Isaac Corporation, which is the main credit reporting company. But three credit bureaus report collect your data and report it to FICO: Equifax, Experian and TransUnion.

9. If I had a bankruptcy, foreclosure, or a judgment against me, is my credit ruined for life?
Not at all, since most delinquent items will report on your credit report only for 7 years before falling off. However, there are a few exceptions:

Charge offs stay on your report for 7.5 years from the first missed payment.

Bankruptcy:
Chapter 7 BK remains for 10 years from the date filed.
Chapter 13 remains for 7 years from the date discharged or a maximum of 10 years.

Student loans:  They can remain on credit until they are paid.

Foreclosures and short sales: These will probably report for the full 7years, but the negative impact will diminish over time. But changes in the industry now make it possible for some people to buy another home in as little as 1-2 years.

10. Do I have to pay to check my credit score?
No you don’t, but be careful of all the offers for free credit reports and scores, which usually are just tricks and will cost you, or be incomplete.

According to the Fair and Accurate Credit Transactions Act (the FACT Act), you are eligible to receive a free copy of your credit report once each year from each of the three major credit bureaus by going to www.annualcreditreport.com.  This will show your credit history, not your score, but at least you’ll be able to monitor your credit activity and make sure you’re on track.  You can also receive a copy of your credit report through a company like Blue Water Credit, MyFico.com, or a mortgage lender when applying for a loan.