It’s a phrase we hear all the time, Sub-Prime, usually associated with the worldwide credit crunch now current across the mortgage market. But where did it come from?

Some historians think it can be traced back to the Old West and the vast cattle markets of of Chicago and Nebraska. Traders labeled the finest cuts of meat as “prime” and the lesser cuts “choice” — something of a euphemism, obviously.

However, “choice” was usually translated in buyers’ minds as “sub-prime”, that is, something no-one really wanted.

Then “prime” was adopted by American bankers to describe rates charged to their most creditworthy customers. All others became “sub-prime”.

British banks apparently have more fruity terms. What in the States is called “sub-prime” is in England labeled a “lemon”.

There are a lot of lemons around just now.

There are reports of increasing support for an alternate system for credit scoring other than the current scoring system based on traditional credit cards and loans.

The new system would track bill payments of other types to illustrate a borrower’s ability to handle their finances.

Often the traditional method of credit scoring keeps consumers with thin credit histories from getting new credit or causes them to pay higher interest rates. Using bill payment data could mean the inclusion of otherwise unqualified borrowers to be considered credity-worthy for loans and mortgages.

Read Alternative Credit Scoring Gaining Support fpr more information.

September is the one year anniversary for yearly free credit reports for consumers. Phased in across the country, all areas were eligible by September of 2005.

All consumers are entitled to a free copy of their credit report once every 12 months form each of the three national credit reporting agencies - Equifax, TransUnion and Experian.

To obtain your free credit reports, you can order them online at www.annualcreditreport.com, call toll free at 1-877-322-8228 or obtain an Annual Credit Report Request Form at www.ftc.gov. Once completed, mail the request form to Annual Credit Report Service, P O Box 105281, Atlanta, GA 30348-5281.

Knowing what is on your credit report is the first and most important step to taking control of your personal finances. Be sure to take advantage of this opportunity to get the information you need to repair your credit rating and to discover and correct mistakes that your credit report may contain.

When a creditor looks at your credit report there are certain factors that will influence their decision about extending credit to you.

Payment History: Do you pay your bills on time? One late payment in two years is not going to make a huge difference but a pattern of late payments will negatively affect your credit rating. Payments that are consistently 30 days overdue will lower your credit score more than any other factor.

Credit Applications: Your credit report will show who else has requested to view your report. If you have applied for credit too many times, the multiple inquiries can lower your score. Keep credit card applications to a minimum, apply only for those accounts you really want and be careful about how many accounts you have open. It is better to have long-standing accounts that are paid on time than to have multiple accounts with shorter histories.

Balances: On average, it is best to never utilize more than 30% of your available credit. Having “maxed-out” accounts will negatively affect your score.

You may be surprised to learn that income is not a major factor in determining your credit score. If you have a large income but a history of late payments, your score will be lower than if you had a moderate income and a consistent payment history.