Credit Score – What Everyone Must Know
Do you know how your credit score is calculated? Did you know that a large number of Americans do not know what their credit score is, nor know how the credit agencies calculate it. In this article we will tell you everything you need to know on one of the major things that can impact your present and future…..Your Credit Score.
FICO Credit Score
The most widely used standard of credit risk (credit score) is calculated by FICO. Other wise known as the Fair Isaac Corporation, FICO was developed by Equifax and the Fair Isaac Corporation to provide financial services to the world’s largest banks. Now the FICO credit score is the standard by many banks as well as other business to determine certain financial risks. Up until around two years ago although you could look at your credit report you could not view your credit score. Now there are some places that allow you to view your score to help you stay informed.
Components of Credit Score
Knowing what actually makes up your credit score is one of the most important piece of information that everyone should know. FICO scores are actually calculated by many pieces of credit data within your credit report. This data is broken down into five categories, each of which having a different level of importance as well as percentage of influence on the credit score. These categories and percentage include: Payment History (35%), Amounts Owed (30%), Length of Credit History (15%), Types of Credit Used (10%), and New Credit (10%).
Credit Score Rankings
The scoring itself is broken down into a point system, also known as the credit score. This score, a three digit number between 300 and 850 is a summary of a person’s financial position at a particular time. As you may already know, the higher the score the more likely you may be approved for a loan, or get more favorable interest rates.
One other important fact that you should know about your credit score is that each credit bureau calculates it differently.
What does that mean for your credit score?
It means that each individual actually has three credit scores for any given inquiry because each three credit bureau has their own, independent database. This means that they may contain entirely different information and data. For this reason, many lenders will check the score from each bureau and determine credit worthiness.
Know what your credit score is and how it is calculated could mean the difference in not getting the credit card, car, or loan of your choice. Know what it is and know that it important to keep up with your credit score, as well as keep it up.
If you would like more information on credit reports and credit scores go to: http://www.creditcardsearchengine.com/creditreports.php