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					Credit Score Secrets - Yahoo! Finance                                                                10-05-31 10:45 AM




         Credit Score Secrets
         by Gail Vaz-Oxlade, for Yahoo! Canada Finance
         Thursday, May 27, 2010
                         Ever wonder how that magical number – The Credit Score – is
                         computed?

                          Whether you’re obsessing over your FICO score or your Beacon score,
                          you’re likely shopping for credit. The FICO score was developed by Fair
         Isaac & Co., which began credit scoring in the late 1950s. The point of the score is
         consolidate your credit profile into a single number. The Beacon score is a brand name
         used by Equifax, the largest credit-reporting agency in Canada. While Fair, Isaac & Co.
         and the credit bureaus do not reveal how these scores are computed, whether you get
         a loan or not is a numbers game: The more points you score on your credit app, the
         better you do.

         There’s a reason you have to fill out so much information when you’re applying for
         credit. Everything counts. Your age, your address, and even your telephone number all
         have a role to play in whether or not you’ll get credit.
         Young ‘uns and old folk are at a disadvantage
         since under 21 and over 65 likely means you            More from Gail Vaz-Oxlade:
         aren’t working; no points for you. If you're
         married, you’ll get a point for being “stable.” And    • Gail's four rules for finding
         while you might think that being divorced would        financial bliss
         work against you (all that spousal and child
         support), most creditors don’t give a whit.            • Gail answers your personal
                                                                finance questions
         No dependents? Zero points. You’re probably
         still gallivanting like a teenager since you haven’t   • Banks crack down on a
         yet “settled down.” One to three dependents?           safety net for your money
         Score one point. You’re a solid citizen. More
         than three dependents? Score zero. Have you            See all of Gail's columns on
         no self control! And don’t you know you that with      Yahoo! Canada Finance
         all those mouths to feed you could get in debt
         over your head?

         Your home address counts too. Live in a trailer park or with your parents? Bad risk,
         score zero points. You could skip town with nary a look over your shoulder. Rent an
         apartment? Give yourself one point. Own a home with a big fat mortgage and you’ll
         score major points since someone has already done some checking and you qualified
         for a mortgage. Own your home free and clear? Even better. You’ve proven you can
         pay off a sizable debt and now you have a pile of equity that the card company would
         love to help you spend.

         Previous Residence? Zero to five years (some applications only go to three years),
         score zero points since you move around too much. No land-line: zero points. How the
         Dickens are they gonna find you when you fall behind in payments. Since they can’t
         use your cell phone to actually locate you physically, it doesn’t count.
         Less then one year at your present employer earns you no points. Again, it’s a stability
         and earning continuity thing. The longer you’re on the job, the more likely you are to be
         bored out of your mind but you’ll score more points. And, not to overstate the obvious,
         the more you make the better.

         The more willing you are to make your lender rich, the higher your score will be. Since
         the FICO score was originally designed to measure customer profitability, if you pay off
         your balance in full every month, you’re going to score lower than the guy who only
         makes the minimum payment and pays huge amounts of interest.


         Scores range from 300 to 900 and if you manage to hit 750 or above you’ll qualify for
         the best rates and terms. Score 620 or lower and you’ll pay premium interest if you
         even qualify; 620 is the absolute minimum credit score for insured mortgages.
         Your credit score can change quickly. Payment
         history accounts for about 35% of your credit          More From Gail Vaz-Oxlade
         score and just one negative report can drop your       Debt-Free Forever
         pristine score into the doldrums. Since scores
         are updated monthly, your bad behaviour won’t
         go unpunished for long.

         The type of credit you have counts for about
         10% of your score. And your current level of
         indebtedness accounts for about 30% so going
         too close to your credit limit is another way to
         deflate your score. One rule of thumb is to keep
         your balances below the 65% mark. So if you
         have a limit of $1,000, you won’t ever carry a
         balance that’s more than $650.                         Debt-Free Forever helps
                                                                readers take responsibility for,


http://ca.finance.yahoo.com/print/personal-finance/article/yfinance/1623/credit-score-secrets               Page 1 of 2
Credit Score Secrets - Yahoo! Finance                                                                                                                                         10-05-31 10:45 AM

                                                                  readers take responsibility for,
           Having too much credit available can also hurt         and control of, their money.
           your ability to borrow since the more credit you       The book will give you a road
           have, the more trouble you can get yourself into.      map to getting out of the red in
           If you’ve got a walletful of cards, canceling credit   36 months or less.
           you’re not using can be a good thing – for both
           you and your credit score – over the long haul.        Find out how to order your
           Careful though. If the card you’re eliminating is      copy of Debt-Free Forever
           one with a long, positive history, you’ll eliminate
           what could be a very good record of your
           repayment when you cancel the card. You’d be better off cutting up the card so you
           aren’t tempted to use it, while you establish a track record (six months or more) before
           you actually cancel the account.


           Credit shopping can also cost you points. Since about 10% of your credit score relates
           to the number and frequency of new credit enquiries, applying willy nilly for new credit
           will end up costing you. However, it’s only when a lender checks your score that this
           registers on your score. Checking your own credit report/score is considered a “soft”
           inquiry and does not go against your score.



           Gail Vaz-Oxlade is host of Til Debt Do U$ Part on Slice and Global TV in Canada and
           CNBC in the U.S. She is now in production on a new series called "Princess," which
           will start airing this fall. The author of 13 books on money, Gail's latest book, Debt-Free
           Forever, is a best-seller in Canada and was released this past April in the US. Gail
           writes regularly for Yahoo! Canada Finance.


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http://ca.finance.yahoo.com/print/personal-finance/article/yfinance/1623/credit-score-secrets                                                                                        Page 2 of 2

				
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