What Is Credit Reputation?

Your credit reputation is what others think about your habits surrounding borrowing and repayment. Whether you know it or not, agree to it or not or want or not, your credit reputation has been scored with a number called a credit score. Your credit score is determined and maintained by the three credit reporting agencies: Trans Union, Equifax and Experian. Each agency will assign you a different score. Because of the way credit scores are determined, however, the scores should be fairly close. You can think of your credit score just like the grades you received in school:

Credit Score     Grade   
Over 720           A Excellent Credit   
700 - 720          B Good Credit   
680 - 700          C+ Above Average Credit   
660 - 680          C Average Credit   
620 - 660          D Below Average Credit   
Below 620         F Poor Credit

Why should you care? Well, people with an “A” credit reputation pay lower interest rates, pay lower insurance premiums, have more credit opportunities and get hired more often. Also, people with an “A” credit reputation can finance a house with a low interest rate and little or no down payment. People with a “F” credit reputation cannot finance a house with a traditional lender.

Several things create and improve your credit reputation:

• Historically paying bills early
• Borrowing less than 25% of the credit available to you
• Having the same credit account for a long time
• Maintaining the right type of credit
• Having the right mix of new credit accounts

Several things that hurt your credit reputation:

• Late payments (the later the payment, the more harm)
• More than one account that has late payments
• Public filings such as bankruptcy, judgments and liens
• Borrowing more than 25% of the credit available to you

These factors impact credit reputation scoring generally. Credit reputation scoring is complex and it is difficult to show exactly how important any single factor is in determining your score. The level of importance for any one factor will be unique to you. What is important is the overall mixture of factors, which varies from person to person and for any one person over time. The two most important things to do to protect your credit score is to monitor it often and, when necessary, seek the help of a credit professional.  -Brandon L. Blankenship (205)912-8248
-Blankenship Harrelson, LLP
www.bhattorneysllp.com