This interesting and highly informative article on credit scores provided as a courtesy by Paul Luykx with Carteret Mortgage Corporation.  For assistance in acquiring a mortgage, contact Paul at (800) 405-0676.

Your credit score, and how it affects you.
Consumers credit scores are designed to measure the risk of default by taking into account various factors in a person's financial history. To get the best rates on loans and credit cards you need a good credit score. Scores range from 300 to 850 - the higher, the better. Scores below 400, or above 800 are rare.

A high score means lenders generally consider that you manage credit responsibly and aren't likely to default on your payments. For that, you will be rewarded handsomely. A low score will more likely result in denial of credit or higher rates. Late payments, maxed-out cards and an excessive number of credit lines could leave your score sorely lacking. Never mind foreclosures or bankruptcies.

The average credit score nationwide is around 660. Generally, if your score is in the mid-700s or higher, you'll be offered the best rates. If your score is less than 620, you'll pay dearly for credit. The difference between best and worst mortgage rates can be more than 3%!

The good news is that it is always possible to improve your score. Improving an already good score takes 60-90 days, and perfecting it takes up to 6 months. Poor credit scores take 12-24 months, over even longer to improve and perfect. It's generally a long haul - like improving your cholesterol or losing weight.

How is your credit score calculated?
The exact formulae for calculating credit scores are closely guarded secrets. The following components are the approximate weighted contributions:

1. 35% - Punctuality of payment in the past (only includes payments later than 30 days past due)
2. 30% - The amount revolving debt (credit card balances, etc.) as a percentage of total available revolving credit (credit limits)
3. 15% - Length of credit history
4. 10% - Types of credit used (installment, revolving, consumer finance)
5. 10% - Recent search for credit and/or amount of credit obtained recently