What You Need to know about your Credit Score

 

Low interest rates make this an excellent time to buy a new home or refinance your mortgage. Or, maybe you have your eye on a shiny new car. Before you head to the showroom to negotiate the price, there's another number that's even more important and can save you thousands of dollars over the life of any loan: your credit score.

 

A credit score is used to define your credit worthiness. The higher the number, the less risk you pose to a lender. On a scale from 300 to 850 it summarizes how much you owe, your ability to pay and how quickly you pay your bills. In addition to determining whether you can buy that new car, credit scores are commonly used as a tool to evaluate job applicants, set insurance rates or qualify for apartment rentals.

 

Clearly, a strong credit score is an important key to your financial success.

 

 Credit Scores Can Add Up to Big Savings

 

When you're ready to apply for a home loan, knowing your credit score is a big advantage. Lenders use credit scores to assess risk ratings that determine mortgage rates and loan fees. The lower your score the higher the interest rate. Just a few points can add thousands of dollars to the cost of the loan and may determine whether you'll qualify. Take a look at the chart below. Over the life of a 30-year, $200,000 loan, just over 75 percentage points will cost a borrower nearly $100 a month and $35,000 in additional interest.

Interest Rate	Total Interest of the Life of the Loan
5.50%	$208,837
5.750%	$220,202
5.875%	$225,937
6.125%	$237,514
6.25%	$243,354

 

 What Can Damage Your Score and How You Can Repair

 

• Always pay bills on time. One missed payment can lower a credit score. The later the payments, the more points lost. An easy way to simplify bill paying is to use Riverview's Free Online Bill Pay service. You can schedule one-time or recurring payments to be paid automatically. For more information visit your local Riverview branch or go online to: www.riverviewbank.com/internetbanking.aspx
• Watch how much you borrow. Try to keep your balance under 25% of your available credit, for example, $2,000 on a card with an $8,000 limit.

 

 Additional Ways to Improve Your Credit Score

• Don't apply for credit cards you don't need. Opening too many accounts in a short period of time will lower your score. n Some credit is better than none at all. Someone with no credit tends to be a higher risk than someone who manages credit responsibly.
• Build credibility with lenders by establishing checking and savings accounts.

 

If you pay your bills on time and stay well within your credit limits, but are still having trouble getting credit, the first thing to do is get a copy of your credit report. You have three credit scores, one from each of the credit reporting bureaus: Equifax, Experian and TransUnion. All are required by law to provide one free credit report every 12 months. For a copy contact: www.annualcreditreport.com, 1-877-322-8228.

 

Be cautious about paying a company to restore your credit for you. Anything a credit repair company can legally do, you can do yourself at little or no cost. According to the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have performed the services promised in a written contract, so never pay up-front for these services.

 

What's important to remember is that no one can legally remove negative information from your credit report that is factual and current. Only diligent debt payment and time will improve your credit score. However, you can and should dispute any inaccurate or outdated information on your credit report. To do this, report your dispute in writing to the credit reporting bureau and the information provider. Clearly state the discrepancy and request that it be removed. Include copies of documents to support your request, and mail it certified, return receipt requested. Be sure to keep copies of all correspondence.

 

The credit reporting company must investigate and then report the results of the investigation to you in writing along with a free copy of your credit report if it results in a change. In addition, if the information provider finds your dispute is valid, it must notify all three credit reporting agencies so your credit report can be corrected. For more information about credit scores and your rights, go to: www.ftc.gov/credit.