Calculating Your Credit Score

Years ago, the way banks calculated your credit score was largely a mystery to the everyday person. Then thanks to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, that information along with many other financial practices changed dramatically, essentially requiring more accountability and transparency in the banking industry.

Now, we have many consumer companies that will gladly show you your credit score. And smart consumers are checking their reports every month! (I like CreditKarma.)

It is also recommended that you look at your credit report at least once a year, and clean up any issues that you might uncover. Best place to do that? AnnualCreditReport.com

Your score is based on these factors:

• Payment history: 35%

• Amounts owed: 30%

• Length of credit history: 15%

• Credit mix: 10%

• New credit: 10%

What are the best things you can do to increase your credit score? First and foremost, pay all your bills on time. Especially your mortgage. And don't open credit cards that you can't pay off in a reasonable amount of time. Then review your credit report and dispute any discrepancies. Pay down your credit card balances, but don't close your account. (unless they have annual fees.) And keep an eye on your score. Be a smart consumer. When you try to get a loan, or rent an apartment, or even apply for a higher level job, you'll be glad you paid attention.