Credit Score
Next to your credit report, your credit score is the most important indicator of your financial success. Your credit score measures your credit risk and financial situation, or credit worthiness, and assigns it a number between 0 and 800.
A person's credit score usually falls between 300 and 850, but can be lower. Essentially, you're credit score tells lenders how likely you are to pay your bills. A credit score is mostly based on information garnered from the three major credit reporting agencies: Experian, Trans-Union and Equifax.
Credit scores are used by banks and lenders to determine how risky it is to lend money to you. Credit scores are used to determine whether you qualify for things like auto loans and home mortgages to credit cards and other lines of credit.
The most widely used and highly regarded credit score in the US is the FICO score, or statistical calculations of your credit worthiness by the Fair Isaacs Corporation. FICO is used most in the bank, credit and mortgage industries. There are others, like PLUS, NextGen and VantageScore, but they are not as widely regarded.
Here are some of the major factors that determine your score and how much each is weighted, according to the Fair Isaacs Corporation:
How often you've made your payments on time, or punctuality (payments past 30 days): 35%;
How much total debt you currently have: 30%;
Length of credit history: 15%;
What forms of credit you use, e.g. consumer finance, revolving accounts and installments;
How recently you've searched for credit and what amount you've received: 10%.
This is a brief, simple outline, but it is all that Fair Isaacs has given. Foreclosures, bankruptcy, number of recent credit checks, employment situation, fines from court judgments, tax liens and other important factors that influence your credit are not included in the calculations above, so use the above as a simple outline, but by no means a full calculation.
Obtaining your credit score is easy; just go online and do a search for credit score. It is beast to use a FICO score as it is regarded as the most accurate, so make sure that is the one you look for. Usually there is a small fee of around $10, and it is often accompanied by a full credit report.
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