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Nov 14, 2008 7:41 pm US/Eastern
Consumer Report: Improve Your Credit Score
In These Tough Economic Times, Lenders Want You To Have An Impeccable Score; CBS 2 HD Is Here To Help
NEW YORK (CBS) ―
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The American job market is beginning to turn into an arena for not only the most qualified, but also the ones in the best finanical shape.
CBS
If you're thinking of applying for a loan or a credit card, it's getting harder to get approved. The credit crunch means consumers need to understand the impact of a low credit score.
As CBS 2 HD found out, there are steps to take now to improve your score.
Your credit score is a number or grade that represents an estimate of your creditworthiness. The highest score you can achieve is an 850.
"About two years ago, you could have had a score of about 620 or so to get a lender's best rate on something. Now, lenders are really looking at a rate of 760 at the least," said Kelli Grant of Smart Money.com.
From a mortgage to a car or home equity loan, even opening a new credit card is much harder these days. You must have a high or near-perfect credit score or you can forget it. But the good news is there are simple steps you can take to boost that score.
First, you need to find out what your current credit score is. While you're entitled to one free credit report a year you'll need to pay for your credit score. You can order your score at fico.com, the company that calculates it.
"You get a lot of great personalized information that will tell you why your score is the way it is and then what you can do to improve it," Grant said.
Once you know your score to raise it, first and foremost, you need to pay off more on your credit cards than you have been.
"That is the most important thing you can do," Grant said. "One late payment is really going to trash your score by about 100 points or more."
Keep in mind that banks not only take your score into account but your activity, so don't move your debt around or constantly transfer balances. Also, don't close unused credit card accounts near loan time, and don't ditch your card and start paying only with cash.
"They need to see good borrowing behavior for you to see a major improvement in your score," Grant said.
And if you sign up for a new credit card, wait a few months before applying for a mortgage or car loan. That will give lenders enough time to see that you're using the card wisely.
And speaking of credit, Citigroup announced it is raising the interest rates of some credit card customers by as much as 3 percent.
American Express is promising to hike its rates by up to 3 percent in the coming weeks.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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