Quiz | May 2010

Do You Know the Score on Your Credit?

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Credit scores may seem like a riddle wrapped in a mystery inside an enigma. Few people understand what goes into the number, yet it is closely tied to their finances. In fact, a bad score can cost you hundreds or even thousands of dollars.

It certainly pays to know your score -- and how to boost it. Take our QUIZ to unwrap the mystery:

By Erin Burt and Kim Lankford

Quiz

Do You Know the Score on Your Credit?

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Question 1 of 10

What is more likely to affect your credit score?

A. Getting married
B. Having overdue library books

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Do You Know the Score on Your Credit?

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Question 1 of 10

What is more likely to affect your credit score?

You're right! B. Having overdue library books is correct.

Sorry, wrong! is incorrect.

The right answer is B. Having overdue library books.

There are no joint credit reports or scores, so getting married in itself won't lower your score. If a library fine goes to collection, however, that can shave 100 points off your credit score.

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Do You Know the Score on Your Credit?

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Question 2 of 10

A bad credit score could affect your ability to get a job.

A. True
B. False

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Do You Know the Score on Your Credit?

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Question 2 of 10

A bad credit score could affect your ability to get a job.

You're right! A. True is correct.

Sorry, wrong! is incorrect.

The right answer is A. True.

Potential employers can pull your credit report when you're applying for a job as long as they notify you first. And, in fact, according to the Society for Human Resource Management, about 13% of them will run credit background checks on all job candidates and 47% will do so further along in the hiring process. Why? Bad credit can be a sign of irresponsibility. A poor score also can make it difficult to get a loan, rent an apartment or get good rates on your auto insurance.

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Do You Know the Score on Your Credit?

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Question 3 of 10

Want to clean up your score? Which things will help the most?

A. Paying your bills on time and not maxing out your credit
B. Keeping accounts open for a long time and having three to five credit cards
C. Flirting with your loan officer and closing unused accounts

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Do You Know the Score on Your Credit?

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Question 3 of 10

Want to clean up your score? Which things will help the most?

You're right! A. Paying your bills on time and not maxing out your credit is correct.

Sorry, wrong! is incorrect.

The right answer is A. Paying your bills on time and not maxing out your credit.

About two-thirds of your score is based on your payment history (the later you are, the more points you lose) and how much you owe (the percentage of your credit limit that you've actually used). Try to keep the balance on your cards below 25% of your available credit. For example, don't charge more than $1,250 on a card with a $5,000 credit limit.

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Do You Know the Score on Your Credit?

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Question 4 of 10

How long can negative items on your credit history impact your score?

A. 1 year
B. 3 years
C. 5 years
D. 7 years

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Do You Know the Score on Your Credit?

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Question 4 of 10

How long can negative items on your credit history impact your score?

You're right! D. 7 years is correct.

Sorry, wrong! is incorrect.

The right answer is D. 7 years.

Negative items generally affect your score for up to seven years, but, as time goes by, their impact lessens. If you pay your bills, keep account balances low and don't open a lot of new accounts, your score can rebound surprisingly quickly. "We've seen cases of bankruptcy in which borrowers have qualified for a premium mortgage in three years," says Craig Watts of Fair Isaac, the company that created the FICO score.

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Do You Know the Score on Your Credit?

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Question 5 of 10

Bob's FICO score is 660. Sally's score is 760. They each apply for a $300,000 30-year fixed-rate mortgage. How will their monthly payments compare?

A. They'll pay the same
B. Bob will pay more
C. Sally will pay more

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Do You Know the Score on Your Credit?

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Question 5 of 10

Bob's FICO score is 660. Sally's score is 760. They each apply for a $300,000 30-year fixed-rate mortgage. How will their monthly payments compare?

You're right! B. Bob will pay more is correct.

Sorry, wrong! is incorrect.

The right answer is B. Bob will pay more.

Based on current interest rates, Bob would have to pay an extra $111 per month, according to myFico.com. Sally's more-favorable score helps her snag a lower interest rate than Bob, resulting in a lower monthly payment.

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Do You Know the Score on Your Credit?

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Question 6 of 10

What's the minimum FICO score you need to get the best interest rates possible?

A. 850
B. 760
C. 700

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Do You Know the Score on Your Credit?

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Question 6 of 10

What's the minimum FICO score you need to get the best interest rates possible?

You're right! B. 760 is correct.

Sorry, wrong! is incorrect.

The right answer is B. 760.

FICO scores range from 300 to 850. A credit score of 760 or higher places you in the top tier. Only 13% of consumers have scores above 800, but the benefits are practically the same as the 760 group.

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Do You Know the Score on Your Credit?

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Question 7 of 10

Your credit card company just increased the spending limit on your card. Will this help or hurt your credit score?

A. Help
B. Hurt

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Do You Know the Score on Your Credit?

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Question 7 of 10

Your credit card company just increased the spending limit on your card. Will this help or hurt your credit score?

You're right! A. Help is correct.

Sorry, wrong! is incorrect.

The right answer is A. Help.

As long as you don't borrow more money, the higher limit improves your credit utilization ratio, which is the percentage of your available credit that you've used. Lenders like you to use only a small percentage of your available credit so you don't appear to be maxing out your cards. Charging $3,000 when you have a $10,000 limit, for example, looks a lot better than charging $3,000 when your limit is only $5,000.

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Do You Know the Score on Your Credit?

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Question 8 of 10

A "secured" credit card is best suited for whom?

A. A victim of identity theft
B. A widow or widower
C. A young adult with no credit history

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Do You Know the Score on Your Credit?

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Question 8 of 10

A "secured" credit card is best suited for whom?

You're right! C. A young adult with no credit history is correct.

Sorry, wrong! is incorrect.

The right answer is C. A young adult with no credit history.

Secured credit cards are a great way to build credit from scratch because you typically need to already have credit in order to get credit. You "secure" your account with a deposit -- say, $500 -- which in turn becomes your credit limit. That way, the bank doesn't take on any risk by giving you a card, and your spending and payment history is recorded by the credit bureaus.

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Do You Know the Score on Your Credit?

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Question 9 of 10

If someone with good credit adds your name as an authorized user on his or her card, you can piggyback on that person's history -- and boost your score quickly.

A. True
B. False

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Quiz

Do You Know the Score on Your Credit?

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Question 9 of 10

If someone with good credit adds your name as an authorized user on his or her card, you can piggyback on that person's history -- and boost your score quickly.

You're right! A. True is correct.

Sorry, wrong! is incorrect.

The right answer is A. True.

When you are added as an authorized user, the credit history for that card account will appear on your own credit report. This is a bit of a trick question because Fair Isaac, the company that created the FICO credit score, said back in 2007 that future versions of its scoring formula would no longer consider such accounts. But in July 2008, it reversed that decision saying piggybackers will still be counted in FICO scoring.

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Do You Know the Score on Your Credit?

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Question 10 of 10

Every time you check your own credit report, your credit score drops.

A. True
B. False

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Quiz

Do You Know the Score on Your Credit?

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Question 10 of 10

Every time you check your own credit report, your credit score drops.

You're right! B. False is correct.

Sorry, wrong! is incorrect.

The right answer is B. False.

Your credit report records an inquiry every time a potential lender requests a copy of the report -- too many inquiries is bad. But only inquiries that resulted from you applying for new credit impact your FICO score, according to Fair Isaac. Other inquiries may show up on your credit report -- such as your own credit report requests, credit checks from businesses to offer you goods or services or credit checks by employers -- but they don't count against your FICO score. Inquiries can stay on your report for two years.

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Quiz

Do You Know the Score on Your Credit?

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