This week, the three major credit reporting agencies announced a new way of calculating credit scores. The move is meant to give you a better understanding of how the score is determined, and how much credit you can carry.
The so-called 'VantageScore' more closely resembles an academic scale.
A - 901-990
B - 801-900
C - 701-800
D - 601-700
F - 501-600
Source: Experian, The Associated Press
Tips: Improving Credit Scores
Here are a few factors that affect your credit score and suggestions on how to improve your score over time.
• Pay bills on time. Bills paid late, or worse, referred to a collections agency, will reflect negatively on your score.
• Don't open new accounts before applying for credit. Inquiries into your credit history that occur when you apply for an account can lower your score. While having a credit history is a positive, opening too many credit card accounts can count against you. Pre-screened credit card offers — and routine checkups from credit reporting agencies, do not affect your score.
• Reduce debt, but don't rush to close accounts. Closing accounts can actually reduce your credit score. Instead of closing accounts before applying for credit, you should...
• Lower balances. Keeping balances close to your spending limit will typically reduce your credit score.
Source: Federal Trade Comission, Equifax
Liz Pulliam Weston, author, Your Credit Score: How to Fix, Improve, and Protect the 3-Digit Number that Shapes Your Financial Future
Kerry Williams, group division president of Experian Credit Services; leader of Experian's team involved in creating the new credit scoring system
Bonnie Daniels, vice president of human resources at MiTek Industries, Inc., a software engineering company