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McMenamins
By Erin Conroy, AP Business Writer for The Skanner News
Published: 24 April 2010

If you think your credit score isn't that important, consider this: It could cost you hundreds of dollars more per month on your mortgage.

A homeowner with a $100,000 mortgage and a 520 credit score will pay $110,325 more in interest charges over the life of a 30-year loan than a homeowner with the same mortgage and a credit score of 720, according to Atlanta-based Consumer Credit Counseling Service. The additional monthly cost is about $307.

"A solid credit score can be a tremendous asset," said Mechel Glass, director of education for CCCS. "Lenders use credit scores to assess the care that consumers take with their credit and to determine the likelihood that they will repay money borrowed."

Credit scores are based upon these five broad categories of credit data:

Payment history makes up 35 percent of your score. While an occasional late payment is factored into this score, a history of paying on time on most of your credit accounts shows lenders you pay your bills as agreed.

Amounts owed accounts for 30 percent of your score. Having credit accounts and owing money on them does not mean you are a high-risk borrower with a low score. However, owing a great deal on many accounts can indicate that a person is overextended.

Length of credit history is 15 percent of your score. In general, a longer credit history will increase your score. Still, a relatively new credit history or only one or two traditional accounts can receive high scores as well.

New credit will determine 10 percent of your score. Research shows that opening several credit accounts in a short period of time does represent greater risk

Types of credit the mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans make up 10 percent of your score.

Consumers are entitled to receive a free copy of their credit report per bureau per year. You can request a copy of your report online at annualcreditreport.com or by calling 1-877-322-8228. It's a good idea to request a copy from each of the three bureaus: Equifax, Experian and TransUnion. Each compiles data slightly differently, and one could include erroneous information not on the others.

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