Money Tips: Credit Rating

If you’re going through a divorce or starting afresh as a single person, it may be time to rebuild your financial life. Managing your credit is a critical step in this process. Credit scores are becoming increasingly important. Not only are they the driving force behind what you will pay for a loan, but there is a growing likelihood that future employers, real estate brokers, and landlords will request a copy of your score. So here are answers to some frequently asked questions.  

Q: How can I establish credit? 
A. Open a checking or savings account. This helps prove financial responsibility. Apply for credit with a local business or store if you have a steady income. Ask a relative with good credit to co-sign a credit application. After using the credit account responsibly for one year, you can apply for credit on your own. Become an authorized user on a credit card from a parent or spouse (if married) with good credit.  

Q: What is a credit score?
A: Credit score or FICO® score is your profile’s information summarized as a number on a scale of 300 to 850. (For more details, go to www.myfico.com.)  A good score is mid-700s. The average score in the U.S. is approximately 660.  

Q: Why do credit scores matter?
A: The higher your credit score, the less you can expect to pay on a loan, from mortgage rates to interest rates on your credit cards.  

Q: What is on my credit report?
A: How many open/active lines of credit you have. The total amount of credit you have available to you.  Your total current outstanding balances. Your high credit balance or the maximum amount of credit you used on a particular card. Total monthly payments -- minimum payments. Mix of Credit -- Mortgages, Overdraft, credit cards, loans.  Historical Delinquencies - How many times have you been late. Court judgment against you.    

Q: What factors might impact my credit score?
A: Payment history/Past delinquencies. If you’re more than 30 days late paying bills, it appears on your report. How much you owe and mix of credit. If you’ve maxed out your credit cards, take  points off your score. If you’re using less than 20 percent of your outstanding balance adds points. Length of credit history. The longer your credit history, the better it is for your score.

Q: How can I get a free copy of my credit report? 
A: You can get one free credit report a year from each of the credit bureaus –  Experian, Equifax and Trans Union. Go to www.annualcreditreport.com.   


Any opinions are those of Elizabeth Cox and not necessarily those of RJFS. Raymond James is not affiliated with and does not endorse, authorize or sponsor this Web site any of the other listed Web sites, or their respective sponsors. Elizabeth Cox is a Certified Financial Planner™ and an independent financial advisor with Raymond James financial services, a member of FINRA/SIPC. She provides clients with a broad range of financial services including financial planning, pre- and post-divorce financial analysis, investment management, and retirement analysis. Elizabeth Cox can be contacted by e-mail at elizabeth.cox@raymondjames.com, or through her Web site, www.divorcefinancialservices.com.