It's Good to be Bob

How your Credit Score really does impact your everyday life!

This is a story about a set of twins; Tom and Bob. Both work at a local hardware store. Both earn the same income. One day Tom and Bob decided to buy houses - the same identical house, right next to each other.

Bob and Tom both went to the bank where they each put 20% down on their house. Both were approved for mortgages for the same amount. However, Bob will pay $1,100 per month for his mortgage while Tom will pay $1,500 per month. Over the life of their mortgages, Tom will pay $144,000 more than Bob. How can this be???

Bob has a credit score of 720 while Tom's score is 650.

Bob gets better rates on his credit cards and pays less for auto and homeowner insurance. He even gets a better service package from his cell phone provider than does Tom.

Your credit score (also known as your "FICO" score) may be the most important 3-digit number in your life. It will affect whether or not you qualify for credit, if you get a job, where you live and how much you pay for certain items. Scores range from 300 to 850 (people rarely reach the top) and the median score for the U.S. is 723. Your score represents your risk for assuming debt based on your payment history.

It pays big time to make an effort to maintain a good credit score. The number one way to ensure a good score is to pay all of your obligations on time including things like library fines and parking tickets. Your payment history counts for 35% of your credit score. One late payment reported to a credit bureau can drop your score by 100 points, particularly if you had a high score. Late payments will remain on your score for up to 7 years and bankruptcies for up to 10 years.

You can also help your score by limiting the number of credit cards that you have. Applying for lots of cards will hurt your score as will closing several cards at the same time. Be prudent. And try not to overuse your available credit. Limit the percentage of available credit to no more than 30%. Excessive spending (even if you pay it off) will damage your score.

You are entitled to one free credit report each year from each one of the three major reporting agencies - Equifax, Experian and TransUnion.

Order your free report at: www.AnnualCreditReport.com. To watch for errors and identify theft, stagger your requests and periodically get a report from each of the three agencies.

If you have any questions about how to better manage your credit and/or increase your credit score feel free to ask your Patriot Banker.