How to boost your credit score

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INDIANAPOLIS, Ind. —  There is one thing almost everyone has, but few people fully understand: a credit score.

A recent survey shows confusion is causing so many Hoosiers to lose thousands of dollars.  Here's what you need to know to improve your understanding and your credit score, which is a big factor in determining your loan rate. A recent survey by Credit Card Insider found many people don't know what goes into your credit score.

"It's quite a misconception that income has anything to do with your actual credit score.  Often times people in lower income brackets actually have higher credit scores.  Income does matter when applying for loans or credit, but it doesn't affect your score," said Nathan Grant with

Here is why a good credit score matters.  The better your score, the lower your interest rate when getting a loan.  For example, if you are buying a $20,000 car, you might pay about $300 a month if you have a low interest rate.  If your interest rate is really high because of bad credit, the same car can cost you $500 a month!  The only difference is your credit score and therefore the loan rate you were able to get.

The Credit Card Insider survey found another mistake people make.  Your credit score is not on your credit report, but the score is determined by the information listed on your credit report.  If you have a bunch of debt and late bills, you'll see that on your report.  Creditors look at that report and then give you a rating.  On the flip side, a good report will often result in a better loan rate.

So, how to get a higher credit score or FICO ?  Don't do what many do, which is close down their credit cards once they are paid off.  An account that's been open for a while looks good on our account, especially if you've been paying that debt on time and in full over time.  That's going to show you're a responsible borrower.  And maybe more important, it also adds to your "Total Available Credit" or what's called your "Credit Utilization."   It's a fancy term lending institutions use to compare your credit limit to the amount of the limit you have used.

Another idea to boost your score and getting lower interests loans is to add a credit card without spending on it.  If you think you'll be turned down for the credit card, you might be wise not to apply.  It could count against you when they run your credit during the application process.  If you do get a new credit card, the minute you get it, the card will increase your overall credit and lower your utilization right away and that will help boost your credit score.  Don't just apply for a bunch of credit cards--that will cause what's known as a hard hit on your credit.  Instead apply for one quality credit card, maybe from your own bank.

So what's a good credit score or bad one?  It varies, but generally  scores below 580 are considered poor and will result in higher interest loans. Something between 600 to 675 is fair, but won't result in the best interest rate available.  The range of 675 to 725 is good and above 740 will help you get you one of the best loan rates.  That wide range of scores can make the difference between getting a loan of 4 percent versus 24 percent.

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