Your Credit Score

Liz Crenshaw reports

The feeling is like oh my God, now what do I do, and it's almost panic.

KRISTI O'DONNELL HAS GOOD REASON TO "ALMOST PANIC." WITHOUT WARNING, HER CREDIT CARD COMPANY DECREASED HER CREDIT LINE FROM $18,600 TO $2,400.

Had you done something wrong?

Uh, no. I had not done anything wrong.

NONETHELESS, THE DROP IN AVAILABLE CREDIT DOWNGRADED HER CREDIT SCORE FROM 730 TO 685. AND FOR O'DONNELL, THAT IS AFFECTING ALMOST EVERYTHING.

Vacation is going to go away. Fixing my car is going to go away. There's just little things that we're not going to be able to buy for the house.

ACCORDING TO CREDIT EXPERT EVAN HENDRICKS, AUTHOR OF CREDIT SCORES AND CREDIT REPORTS, WHAT HAPPENED TO O'DONNELL IS HAPPENING TO MANY CONSUMERS.

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There's been a whole surge going through the credit card industry of dropping people's credit limits, and sometime very dramatically. It affects exactly how much you're going to pay out of pocket in interest, if you can get the loan at all.

HENDRICKS SAYS FEW CONSUMERS KNOW HOW CREDIT SCORES ARE EVEN CALCULATED. HE SAYS THE PRECISE FORMULAS ARE KEPT TOP-SECRET, BUT GENERALLY, PAYMENT HISTORY MAKES UP 35%... INDEBTEDNESS MAKES UP 30%, CREDIT HISTORY MAKES UP 15%, TYPE OF CREDIT...MEANING BANK MORTGAGE VERSUS FINANCE COMPANY, MAKES UP 10%, AND CREDIT INQUIRIES YOU INITIATE MAKES THE FINAL 10%.

Of course that credit score translates into real dollars. Take a couple who want to buy a house

IF THE COUPLE TAKES OUT A THREE HUNDRED THOUSAND DOLLAR LOAN FOR THIRTY YEARS, WITH A 720 CREDIT SCORE, THEY COULD QUALIFY FOR A 4.8% INTEREST RATE. BUT IF THEIR CREDIT SCORES IS 650, THEY WOULD PAY 6.6%. THAT HIGHER INTEREST RATE COSTS THE COUPLE FOUR THOUSAND MORE A YEAR AND ONE-HUNDRED TWENTY THOUSAND DOLLARS OVER THE LOAN'S LIFETIME AND $120-THOUSAND DOLLARS OVER THE LOAN'S LIFETIME.

NOW YOU CAN BOOST YOUR CREDIT SCORE BUT IT TAKES TIME AND EFFORT. PAY BILLS ON TIME. KEEP CREDIT CARD BALANCES LOW. PAY DOWN DEBT. IF YOU MISS A PAYMENT, GET CURRENT QUICKLY. AND A SURPRISING ONE. DON'T CLOSE EXISTING CREDIT CARD ACCOUNTS. THAT LOWERS YOU CREDIT LIMIT AND SHORTENS YOUR CREDIT HISTORY.

KRISTI O'DONNELL SAYS SHE HAS LEARNED A LOT ABOUT CREDIT SCORES AND THE DRAMATIC IMPACT THEY CAN HAVE ON CONSUMERS LIKE HER.

The credit score is like the end-all, be-all. And if it tanks, then you're done.

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