Do you know your score?

Nathan Froehlich had never checked his credit report before. He didn't know what his credit score was. On Monday, the North Dakota State University senior went over his report and score with Joshua Hahn, a personal banker at Starion Financial. Fr...

Nathan Froehlich and Joshua Hahn
Nathan Froehlich, left, an NDSU senior, listens as Joshua Hahn, a personal banker at Starion Financial in south Fargo, explains his credit report and credit score earlier this week. Sherri Richards / The Forum

Nathan Froehlich had never checked his credit report before. He didn't know what his credit score was.

On Monday, the North Dakota State University senior went over his report and score with Joshua Hahn, a personal banker at Starion Financial.

Froehlich was pleasantly surprised. "It's higher than I would have thought it would be," he said.

Lenders and financial counselors say it's important people take a look at their credit score well before they seek any big loans, such as a mortgage. That three-digit number can have a big impact on their wallets. Lenders, landlords and hiring firms often check credit scores. Scores can influence approval and interest rates.

"A few points difference in your credit score can have thousands of dollars' impact over 30 years of a mortgage," said Mike Wickham, retail branch manager of Starion Financial in southwest Fargo.


Through the end of February, Starion branches are offering free credit reviews, including a free credit report and score, to anyone who makes an appointment. Wickham said the goal is to explain to people why their scores are high or low.

"We feel it's important we educate people ahead of time on how their score can impact them," Wickham said.

Where is my score?

There are many different types of credit scores, but the ones most often considered by lenders are FICO scores, developed by the Fair Isaac Corp.

FICO scores are provided to lenders by the three major credit reporting agencies: Equifax, Experian and Transunion. Each may report a different score, though won't vary too much, Wickham said.

Anyone can get one free credit report yearly from each of the three credit reporting bureaus at , but the credit score isn't included for free on those reports.

Since 2003, lenders have been required to disclose to applicants scores used to judge them, and two new laws that kick in this year will give more people free access to their scores, according to a Feb. 9 article by MSN Money's Liz Weston.

What's in a score?


Credit scores are based on five factors, according to a booklet from Fair Isaac:

  • Payment history (35 percent of the score).
  • Amounts owed (30 percent of the score).
  • Length of credit history (15 percent of the score).
  • New credit (10 percent of the score).
  • Types of credit in use, such as revolving (credit cards) and installment (mortgage and car loans) accounts (10 percent of the score).

FICO scores range from 300 to 850. The lower a person's score, the riskier they appear to a lender or other credit granter, said Jesse Jurgenson, a financial counselor at The Village Family Service Center in Fargo, which offers credit reviews for a fee.
"The best way to predict if somebody will pay their bills in the future is how they've paid their bills in the past," he said.

Jurgenson said there are several criticisms of the scoring system. It can be inaccurate, if the credit bureaus have wrong information. It also looks at a seven-year time frame, meaning mistakes from your early 20s can still haunt you at 30. It doesn't consider personal circumstances, such as a medical crisis.

"The system's not perfect, but you have to rank people somehow," Jurgenson said.

Credit scores don't consider factors like age, race, religion or education.

What's a good score?

Wickham says around 700 is the dividing line between a good and bad score.

Jurgenson said anything above 680 used to be considered a good score, but as lenders have less money to loan, it's upped the necessary credit score to low 700s.


Someone with a score under 500 will have trouble getting credit approval, Jurgenson said.

Improving a score takes time, Wickham and Jurgenson said. That's why applicants should check their scores six to 12 months before seeking a big loan.

By looking at their credit report, applicants can dispute any mistakes and detect possible identity theft.

Credit reports also provide clues on why a score may be low - such as missed payments or overextended credit - and what can be done to raise it.

The most basic advice is to use credit responsibly. Jurgenson often tells college students to use one credit card to buy gasoline and then pay off the card on time each month.

"You need to use credit to build credit," he said. "In some ways it's better to have bad credit than no credit."

Tips for a good FICO score

  • Do pay your bills on time? If you have missed payments, get current and stay current.
  • Don't use a high percentage of your available credit.
  • Don't open several credit cards in a short period of time. Apply for and open new credit accounts only as needed.
  • Don't close unused credit cards. Owing the same amount but having fewer open accounts may lower your score.
  • Do pay off debt rather than moving it around.

Source: "Understanding Your FICO Score" by my FICO


Readers can reach Forum reporter Sherri Richards at (701) 241-5556

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