Know the Score: CCCS of Greater Atlanta Offers Tips for Understanding, Improving Credit ScoresThursday, April 16, 2009

ATLANTA GA, April 16, 2009 -- A 2008 report published by Consumer Federation of America reported that consumers who increased their credit score by just 30 points would save an estimated $105 annually on finance charges related to credit card debt.

"A credit score is a vital component of overall credit health," said Suzanne Boas, president of Consumer Credit Counseling Service of Atlanta (CCCS). "Lenders use credit scores to assess the care that consumers take with their credit and to determine the likelihood that they will repay money borrowed."

A solid credit score can be a tremendous asset, helping you secure the best rates on mortgages, automobile loans, credit cards, personal lines of credit, and more. Consumers with lower credit scores will be less likely to get approval for zero interest rate promotions or take advantage of opportunities to transfer balances to credit lines with lower interest rates.

Knowing what makes up a credit score, what your score is, and how to earn and maintain the best possible score should be part of an overall strategy to maintain your fiscal health.

What makes up a credit score?

A credit score is a rating based ONLY on information found in your credit report, such as previous credit performance, how much debt you currently have, how long you have had established credit accounts, and the types of credit available to you. A credit score is NOT based on factors such as race, gender, color, religion, national origin, and marital status. Additionally, your income, employment, and residence are not part of your credit score.

The most common credit score used in mortgage lending is known as a FICO score, ranging from 300-850.

Scores are based upon five broad categories of credit data, including:

Payment history - 35% of your score is based on this category. Lenders look at your overall payment record in making payments to other lenders. Simply, do you pay your bills as agreed? While an occasional late payment is factored into this score, a history of paying on time on most of your credit accounts will help increase your score.

Amounts owed - 30% of your score is based on this category. Having credit accounts and owing money on them does not mean you are a high-risk borrower with a low score. However, owing a great deal on many accounts can indicate that a person is overextended. Lenders are looking to see how many accounts have balances, how much of your total credit line is being used, and how much you still owe on installment loans, such as car loans. Paying down installment loans and other balances is a good sign that you are able and willing to manage and repay debt.

Length of Credit History - 15% of your score is based on this category. In general, a longer credit history will increase your score; however, a relatively new credit history or only one or two traditional accounts can receive high scores as well.

New Credit - 10% of your score is based on this category. Research shows that opening several credit accounts in a short period of time does represent greater risk--especially for people who do not have a long-established credit history. Your credit score does distinguish between a search for many new credit accounts and rate shopping for one new account. Your score takes into account how many accounts you have, how long it has been since you opened a new account, recent requests for credit, and a good recent credit rating.

Types of Credit - 10% of your score is based on this category. The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. It is not necessary to have one of each and it is never a good idea to open credit accounts you don't intend to use.

How do I know what's in my credit report and what my score is?

"Knowing what is in your credit report is the responsibility of every consumer," says Boas. Consumers are entitled to receive one FREE copy of their credit report per bureau per year. You can request a copy of your report online at www.annualcreditreport.com, by calling 877.322.8228, or by mailing a request form to Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348-5281. It is a good idea to request a copy from each of the three bureaus - Equifax, Experian and TransUnion. Each compiles data slightly differently and one could include erroneous information not on the others.

In order to access your report, you will need to provide your name, social security number, date of birth, and information only you would know, such as the amount of a monthly mortgage or car payment.

When requesting your free credit report, you will also have the option to purchase a report that contains your credit score. You can also purchase your FICO score directly from Fair Isaac at www.myfico.com.

How do I deal with incorrect information on my report?

As you review your credit report, if you find inaccurate information or feel that the report gives a misleading picture of past credit problems that have since been resolved, you can write to the reporting agencies asking them to correct your record. Be sure to provide any documentation that supports your claim. If you have an unresolved dispute with a creditor, the credit agency must include your explanation of the situation in future credit reports.

How can I improve my credit score?

There are lots of ways to maintain a good credit score and to improve one that is the result of past financial struggles. Fair Isaac offers the following tips for raising your score:

• Pay your bills on time
• If you have missed payments, get current and stay current
• Be aware that paying off a collection account, or closing an account on which you previously missed a payment, will not remove it from your credit report
• If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor. Seeing a counselor can put you on the path to raising your score, and you won't lose points for seeking help
• Keep balances low on credit cards and other "revolving credit."
• Pay off debt rather than moving it around
• Don't close unused credit cards as a short-term strategy to raise your score.
• Don't open a number of new credit cards that you don't need, just to increase your available credit.
• If you have been managing credit for a short time, don't open a lot of new accounts too rapidly
• Do your shopping for a given auto or mortgage loan within a focused period of time
• Re-establish your credit history if you have had problems
• Note that it's OK to request your own credit report and your own FICO score without affecting your score
• Apply for and open new credit accounts only as needed
• Have credit cards--but manage them responsibly
• Note that closing an account doesn't remove it from your credit report

Need help getting started? CCCS pulls your credit report and score during a confidential budget counseling session, and also offers money management education, debt management programs and other services to help consumers. Contact CCCS at 800.251.2227 or online at www.CredAbility.org.

About CCCS of Greater Atlanta:

CCCS of Greater Atlanta serves clients in all 50 states and has 33 offices in four states. It is the headquarters for the CredAbility Network, a family of agencies serving consumers in north Georgia, south and central Florida, middle Mississippi and east Tennessee as well as nationally via telephone and Internet.

CCCS is accredited by the Council on Accreditation and is a member of the Better Business Bureau and the National Foundation for Credit Counseling (NFCC). Governed by a community-based board of directors, CCCS is funded by creditors, clients, contributors and grants from foundations, businesses and government agencies. Service is available at offices throughout metro-Atlanta and north Georgia in English, Spanish and American Sign Language. CCCS offers around the-clock help by phone at 800.251.2227 or at its Web sites, www.CredAbility.org and www.CredAbility.org/es.

Media Contacts:

Scott Scredon 404.653.8833, Scott.Scredon@CredAbility.org

John McCosh 404.260.3108, John.McCosh@CredAbility.org