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Top things you probably didn't know about credit score

From credit check "soft pulls" to the percentage you should be financing; a financial counselor has tips on how to boost credit scores.

PORTLAND, Maine — The world of credit scores can be complicated and hard to follow. Couple that with the importance of your knowing and managing your credit score. Here to talk credit scores is Brenda Pollock a financial counselor at Evergreen Credit Union. 

You can work yourself into a tailspin trying to access, decipher and figure out your credit score. What is a credit score? 

A credit score is a three digit number between 300 – 850 that relates to how likely you are to repay debt. Lenders use it to decide whether they’ll approve someone for a credit card or a loan and to set a rate of interest on that loan. The higher your score, the lower interest you’ll pay.

The average credit score of Mainers is 689. Is it true someone can have more than one score and how do they calculate your credit score?

Yes, you can have so many different credit scores. The reason is that not all scores measure the same things in the same way. Experian, Equifax and Trans Union are the national credit bureaus that capture, update and store credit histories. They look at:

-Payment history = 35% of your score - pay on time all the time.

-Credit Utilization = 30% of your score - Never owe more than 30% of your credit limit.

-Length of credit history = 15% of your score - Keep your oldest credit card even if you don’t use it.

-New credit = 10% of your score - Don’t open too many accounts in a 12-month period.

-Types of credit = 10% of your score - Variety is good – Auto, home, student loans, and 2 – 3 credit cards.

Because you can have a different credit score from each bureau, it’s more important to look at the range your credit score falls in.

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You and I have discussed the importance of knowing what your credit score is and checking your score often. Doesn’t checking your credit score hurt your score?

Checking your score on an app like Credit Karma for example, is considered a soft inquiry and will not hurt your score. As a matter of fact, we encourage knowing and monitor your credit scores for any changes.

A hard inquiry is when you are applying for a credit card or any loan. Too many hard inquires will hurt your score.

If someone wants to boost their score, what do you recommend?

Never make a late payment – that could lower your score by as much as 100 points.

Pay down your balances to less than 30%

Remove any collection account by negotiating a pay for delete in writing before paying it off.  

Call your credit card company and request a credit limit with a soft pull of your credit.  

There’s been a lot of talk about a change in the way a FICO score is calculated. How is a FICO score different from the other credit scores and should we be concerned? 

Thirty years ago, the Fair Isaac Corporation debuted the FICO score; an industry-standard for scoring creditworthiness that was fair to both lenders and consumers. A FICO score is used by 90% of the top lenders in America.

Consumer debts are at a record high so the FICO credit score, will place more importance on missed payments, rising debt levels, and to those who have taken out personal loans to consolidate debt.

For those consumers who manage loans and debt well, they will likely see their score rise higher. For those who typically miss payments and keep high credit card balances, the changes to the FICO scoring model could lower the overall credit scores for many Americans.

RELATED: He’s reported from six continents. He still misses the pizza from where he grew up in Maine.

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