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After making a casual comment to a clerk at my bank, I realized how fragile our credit scores are. I merely said, “I wonder how much money I could borrow for a car loan.” A few days later, I got a letter saying my credit score had been dinged FIVE points! Cheeeee…….So, I paid close attention when this article appeared by Tim Carver,

credit-score-chart-1There’s lots of confusion “out there” on credit scores. Take the following true-false quiz to check your credit score IQ. (No peeking at the answers in advance!)

1. How much money you have in savings has an effect on your credit score.

2. A poor credit score will stop you from getting a loan.

3. The three credit bureaus (Equifax, Experian, and TransUnion) provide the exact same credit reports and credit scores.

4. Your level of education can affect your credit score.

5. The lower your credit score, the higher your interest rate will be.

6. How you use your debit cards is a factor in determining your credit score.

7. Paying cash for everything will help improve your credit score.

8. Checking your credit report too often will hurt your credit score.

9. A credit score and a credit report are essentially the same thing.

10. There are ways to quickly improve your credit score.

Let’s see how you did.

1. How much money you have in savings has an effect on your credit score.

False. It’s what you SPEND that affects your score, not what you save.

2. A poor credit score will stop you from getting a loan.

False. According to MyFico.com, lenders consider information such as the amount of debt you can reasonably handle, your employment history, and your credit history. Based on this information they may still extend credit to you even though your score is low. But lenders almost always charge a higher interest rate to those with lower scores.

3. The three credit bureaus (Equifax, Experian, and TransUnion) provide the exact same credit reports and credit scores.

False. Each of the three credit bureaus use unique formulas to compute their credit score. And since the frequency of updating their credit reports vary, the reports and credit scores can vary slightly also.

4. Your level of education can affect your credit score.

False. Education level is not taken into consideration in a credit report. Credit reports consist only of debt-related information.

5. The lower your credit score, the higher your interest rate will be.

True. If you’re a greater risk to lenders you have to pay for that with a higher interest rate. This is how the lender is rewarded for taking a chance on you.

6. How you use your debit cards is a factor in determining your credit score.

False. Debit cards are tied to your checking account and are not considered an extension of credit. As such they don’t end up on credit reports.

7. Paying cash for everything will help improve your credit score.

False. Using cash for everything doesn’t provide lenders any kind of ‘report card’ of how financially responsible you are. If you don’t have a credit history, you won’t have a credit score. No credit score, no loan.

8. Checking your credit report too often will hurt your credit score.

False. A person can check their credit report as many times as they wish without affecting it. In fact, it’s smart to do so. Inaccurate credit reports are not all that uncommon and should be corrected.

9. A credit score and a credit report are essentially the same thing.

False. Your credit report is a detailed record of your credit history. It includes:

* Personal information (name, address, Social Security number)

* A seven year history of payments, credit limits, monthly balances, and late payments

* Public records such as bankruptcies, tax liens, foreclosures

* A record of anyone who has looked at your credit report in the past two years

(You can request one free credit report once every year at www.AnnualCreditReport.com from each of the three main credit agencies: Equifax, Experian, and TransUnion.)

A credit score is a three digit number that is derived from your credit report. According to myFICO.com the score is based on five components:

* Payment history (35 percent)

* Current debt (30 percent)

* Length of credit history (15 percent)

* New credit (10 percent)

* Types of credit (10 percent)

10. There are ways to quickly improve your credit score.

False. Remember, your credit score is designed to reflect your credit dependability over time.

It will take some time, some discipline and some diligence on your part but you can replace bad marks with good ones. You can improve your score by paying your bills on time, paying off debt, keeping older credit cards open, and not opening multiple credit accounts over a short period of time. Another key component to a higher credit score is not exceeding 50 percent of your available credit in any given month.

So how well did you score?

9 – 10 Outstanding!

6 – 8 I’m still impressed!

3 – 5 Only your mom would be proud

1 – 2 Destroy all evidence of this quiz

RVORVORVORVORVORVORVO

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