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Let’s talk credit.

I remember my excitement as I got my first store card. I was a beaming 18-year-old in Macy’s Herald Square, and I could do no wrong… but I did. Understanding your credit and what comprises your credit score is something we should all seriously think about (if you haven’t already) before signing up for those store cards to “SAVE AN EXTRA 10%.” The attractiveness of these discounts can be appealing, but when it comes to credit, 10 percent now can mean a denied loan later.

Even if you have not checked on the status of your credit report in the past, I can guarantee you that someone else has. Each time you receive a new “PRE-APPROVED” credit card in the mail, that is the result of a company checking your credit report and assuring you that you are, in some capacity, worthy of plastic. This does not mean that your credit is in good standing, though. If you do not know your credit score or have not reviewed your report for errors, then you should think twice before opening new accounts.

Here’s the good news: If you don’t already know your credit score, haven’t checked in a while, or just want to check the status of your reports, you are entitled to a free report each year from each of the three nationwide reporting agencies (Equifax, Experian, and TransUnion) at

Your credit score is based on your FICO score, which is a three-digit number ranging from 300 to 850. The higher your score, the more money you’ll be able to borrow at lower interest rates. There are five categories that make up your FICO score, which are:

  • 35% Payment history
  • 30% Outstanding balances
  • 15% Length of credit history
  • 10% New Credit
  • 10% Types of credit used

Checked your score and are unhappy with what you see? Here are a few tips to help raise your numbers:

  1. Pay bills on time. If you have missed payments in the past, get current on all your accounts and set reminders (or try automatic payment) so that you can help improve your score. Missing payments and delinquencies negatively affect your credit score.
  2. If you can’t pay it off, at least pay the minimum. Even if you don’t have enough money to pay off your cards, paying the minimum balance every month will show lenders that you are a responsible borrower.
  3. Only open new accounts as needed. You do not need 12 department store cards, so choose wisely. When opening new accounts, remember that staying current and paying the bill on time will help your score in the long run.

Need a credit card diet? Here are 9 steps to getting out of credit card debt.

Does the economy have you turning to credit cards? Don’t let the recession get you down! Here’s how.

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