ATLANTA - The massive Equifax breach highlights just how important our credit worthiness is to us. And it's led to big questions.
How did three big credit bureaus get so powerful, doling out credit scores that impact how we can borrow money, even gets jobs today? Well it goes back, way back to the 1800s when merchants got together and exchanged info on who was safe to extend credit to.
Fast forward to the 1950s and there were about 2,000 credit bureaus. Then, as the computer age came in, the credit keepers narrowed down to a few.
Let's break down just what a credit score is made of. There are five main parts, but here are the big three.
Making payments on time. That counts for 35 percent of your credit score. Nearly as much at 30 percent is your debt-to-credit ration.
And, this is what that means. We'll use a credit card example. Let's say you have a $1,000 credit limit. You pay on time, but you carry a high balance of $900. You're using 90 percent of your credit. They like to see that no higher than 30 percent. So anything over a regular $300 balance on this $1,000 card can ding your credit.
And finally the last of the big three is for 15 percent is how long you've had a credit history. The more history the better.
A reminder of how credit scores break down.
- 800 and above = EXCELLENT
- 799 - 740 = VERY GOOD
- 739 - 670 = GOOD
- 669 - 580 = FAIR
- 579 and below = POOR
Remember this is a fluid score. Anything that can impact your credit, like having your identity stolen, will hurt you.