How to Scrub Your Credit Score
You know a higher credit score can mean big savings. But do you know what really affects your number--and how to improve it? Take our test and find out.
By David Futrelle

(MONEY Magazine) – 1) First step: Find out your number. Luckily, you're now entitled to one free credit score a year from the three big credit bureaus. True or false?

[A] True [B] False

ANSWER: B. It's true that three credit reports a year are now free for the asking, but you still have to pay for your credit score (you can get both at annualcreditreport.com; a score costs $5.95 to $7.95, depending on the bureau). If you haven't ordered a free report recently (nearly half of Americans have never done so), don't delay: One in four contain errors serious enough to result in a denial of credit. As for your score, the scale ranges from 300 to 850; the median is 723. The higher your score, the lower the interest rate you'll be charged when you borrow.

2) You got your score, and it's below 700. What can you do to raise it? (Check all that apply.)

[A] Get a higher-paying job. [B] Pay off fines for overdue library books. [C] Pay your bills on time. [D] Make partial payments on past-due accounts.

ANSWER: B, C and D. You'll certainly enjoy the bigger paycheck, but it won't boost your credit score. Making timely payments is what matters most, accounting for 35% of the total score (yes, unpaid library fines count too, if they go into collections). Six to 12 timely payments in a row should be enough for you to see a difference in your score. Can't clear your debts? At least make a partial payment on accounts in arrears; the longer the debt is overdue, the more it will drag down your score.

3) Which scenario will give you the better credit score?

[A] A $2,200 balance on a credit card with a $3,000 limit [B] A $3,000 balance on a total credit limit of $15,000

ANSWER: B. It's not just the total amount you owe that's important; it's how much you owe relative to how much you can borrow. This ratio, in fact, is another critical factor in determining your score. To avoid looking overextended to lenders, try to keep your debts to 30% or less of your available credit, and don't rush to close unused credit-card accounts.

4) You hope to nab a better rate on a car loan by shopping among lenders for the best deal. Will that hurt your score?

[A] Yes [B] No

ANSWER: B. It's true that applying for several credit cards within a short time will ding your score, but lenders know that searching for the best rate on a loan is a smart strategy. With that in mind, credit score formulas simply ignore any rate shopping you've done in the 30 days before your score is calculated; multiple mortgage or auto-loan applications within a 45-day period are treated as a single credit inquiry. And don't worry about possible fallout from checking your own credit rating--scorers don't hold that against you either.

5) Okay, you're committed to improving your score. How much will you save annually on a $250,000, 30-year fixed-rate mortgage if you're able to raise your score from 630 to 720?

[A] $360 [B] $1,430 [C] $2,780 [D] $3,060

ANSWER: C. Better credit really is well rewarded. At recent interest rates, with a score of 720 you would save $2,780 a year, or a little more than $230 a month, on that mortgage, according to Fair Isaac, the leader in the credit scoring business. Boost your score to 760 or more and you save another $435 a year. And then there's the possible savings on credit-card rates. Raising your score from 600 to 720 could drop your credit-card rate from 18% to 9.6%. If you carry a $3,000 balance, you'll save $258 in interest charges each year. Not a bad payoff for good behavior.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.