Tips for Understanding Your Credit Score
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Posted On :
Aug-31-2011
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Article Word Count :
384
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Any time you apply for a new line of credit including credit cards, car loans, mortgages, and even school loans, lenders need to know how much of a credit risk you are, and they will decide whether or not to approve you based on your credit score.
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Understanding Your Credit Score
Any time you apply for a new line of credit including credit cards, car loans, mortgages, and even school loans, lenders need to know how much of a credit risk you are, and they will decide whether or not to approve you based on your credit score. Your score helps lenders determine whether or not they can extend to you a new line of credit and if so, how much and at what interest rate. In short, your credit score helps creditors predict whether or not you will be able to pay them back.
Where Does Your Credit Score Come From?
So where does your credit score come from, and what does your credit score mean? The most commonly used credit scores come from the Fair and Isaac Corporation (FICO), and you have three scores from three different credit bureaus – Expe-rian, TransUnion and Equifax. Your credit scores from each bureau are calculated using at least one account that has been open for six months and one account that has been updated within the past six months. Your score might be different at each bureau, as each may have different infor-mation on you. Some lenders use only one bureau's score, and others will use all three.
Five Criteria for Calculating Credit Scores
Your credit scores are calculated using five main criteria. Your payment history makes up 35 percent of your score; how much you owe makes up 30 percent; 15 percent for your length of history; 10 percent reflects new credit; and the types of credit you use make up 10 percent.
FICO scores range from 300 to 850 points, and of course, the higher the score the better. The higher the credit score, the less of a risk you are to creditors, and the more likely they will be to offer you credit and at a low interest rate.
It is important to monitor your credit reports so you can take the proper action to improve your score. It can, however, take some time to update your credit score, so even if you were to pay a credit card in full today, it may take 30 to 45 days for that creditor to update your information with each reporting bureau.
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Article Source :
http://www.articleseen.com/Article_Tips for Understanding Your Credit Score_78322.aspx
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Author Resource :
Visit http://www.advantageccs.org for more information about where does your credit score come from, and what does your credit score mean?
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Keywords :
where does your credit score come from, what does your credit score mean,
Category :
Finance
:
Finance
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