Save money by raising your credit score

With the growing number of foreclosures, repossessions and jobs being lost, lenders are taking a hard look at borrowers before lending money. Lenders care about how likely you are to repay your debt on time, and your credit report gives them a good indication of how you’ve handled credit in the past.

The FICO score is the most commonly used credit-rating system, but each of the big three reporting agencies use the information in a different way, thus producing different credit scores on the same credit history. (A lender will likely take the middle of these three numbers.)

Here are some steps you can take to improve your credit score:

• Pay your bills on time. This counts as 35 percent of your total score.

• Limit the amount of your available credit that you use.

• Limit the number of inquiries on your credit report. If you need to shop for deals, perhaps for a car loan, do your homework so that the credit inquiries are all done in a short period of time, say a month. The credit bureau will consider all the inquiries in a given amount of time to be part of the same inquiry.

• Don’t automatically cancel old credit cards that you don’t use. Longevity of your accounts counts for 15 percent of your FICO score. Canceling the cards will often result in a lowering of your score.

• The jury is out on whether credit counseling will hurt your credit score. It probably won’t, but it might impact your ability to get a loan if part of the counseling was to negotiate smaller payments on old debt.

• Track your credit score. If it goes down, follow up by getting a copy of your credit report to verify that all the information is correct.

A good credit score can make the difference between getting a loan with a low interest rate or getting one with a higher rate — or not at all.

For more information, go to www.privacyrights.org, then click on FAQ and Index and scroll down to Credit Scores: Fact Sheet 6(c): Your Credit Score: How It All Adds Up. The Federal Credit Information Center has good information as well. Check www.pueblo.gsa.gov and put “credit scores” in the search box.