How is your credit score determined?

There are 3 different credit bureaus, so how is that one number determined?

How is your credit score determined?

Most consumers are aware that they have something known as a credit report that is used to determine whether or not they would qualify for a loan. Fewer are familiar with the FICO score, a creation of the Fair, Isaac, and Co. which distills their entire credit report down to a three-digit numeral. What, exactly, is this score? How is it compiled? Can anything be done to improve it?

The FICO credit score is used by all three major credit bureaus 閳?Experian, Trans Union and Equifax. They are the companies that keep track of the credit and lending transactions of millions of Americans. The score is used to provide, in a nutshell, a figure that represents the credit-worthiness of a consumer. That score, which ranges from a low of 300 to a high of 850, is used in many ways by businesses and employers. The score is used by insurance companies to set rates, landlords to establish security deposits, and even prospective employers to determine whether hiring someone is a good risk. Despite the importance of credit scores in their lives, few Americans understand how it works.

The score is determined by a variety of factors, each of which makes up a portion of the score:

Approximately one third of the score represents the individual閳ユ獨 payment history. Previous loans, and the ability to pay them are shown in this portion of the score. Both late payments and failure to pay at all affect this portion of the score. Those who have paid all of his or her loans on time will obtain the highest scores.

Another third of the score is determined by current debts, and the ratio of debt to the amount of available credit. Keeping all of your credit cards at or near their limits will hurt this portion of the score. This seems obvious; those who are already near their credit limits may have trouble paying back any future loans.

The remaining third of the credit score is determined by three factors 閳?length of credit history, recent credit applications, and the types of overall credit in the individual閳ユ獨 credit history. The length of the credit history is the most significant item, as lenders are more suspicious of borrowers who have not established a pattern of borrowing and repaying loans. A history of repaid loans goes a long way towards fortifying this portion of the score. Recent credit applications, particularly a lot of them, may suggest that the individual is desperate to borrow more money and may have a financial problem. Similarly, the types of credit demonstrate spending patterns and reliability. A credit report containing all credit cards may be seen as more risky than one with a few credit cards, a repaid auto loan and an ongoing mortgage.

By seeing how a credit score is compiled, consumers can take action to keep their scores healthy. A good score helps borrower obtain loans at better interest rates, and that is something that everyone can appreciate

How is your credit score determined?

Usually, people who are looking at your credit take the middle score as the determining one to make you an offer. Your credit score is determined from a variety of factors. Here are some tips.

1) You must have at least 3 lines of credit. For example, 2 credit cards and a car loan.

2) Never borrow more than half the limit of the card.

3) To %26quot;pump%26quot; up your score, run your credit cards up (still, not more than half the limit)and then pay them off each month to $0.

4) Make sure to use both cards and not leave one with $0 balance all the time.

5) If you have bad credit, you can raise your score by having someone with good credit put you on as a 2nd card holder on their account. You immediately get their %26quot;good%26quot; credit added to your bad credit. However, your bad credit does not effect their good credit. Sounds crazy but it is true. It is a temprary loophole in the system. Good luck!

How is your credit score determined?

what makes up the score?

35% is payment history

30% is capacity, which means how much credit limit you have on your cards

15% is length of credit

10% is accumulation of debt in last 12-18 months

10% is mix of credit (installment vs. revolving)

here are some tips:

--closing credit card accounts can hurt your score because it lowers your available capacity, which is 30% of your score

--closing credit card accounts that are seasoned credit (meaning you%26#039;ve had them for a long time) can hurt your score because it shortens your length of credit, which is 15% of your score

--borrowing from finance companies can lower your score

--having too many credit cards is not good; usually 4 cards is enough

--balances on credit cards should be kept at lower than 50% of the credit limit

--don%26#039;t close old credit card accounts even though they have a horrible rate and low credit limit; keep them just for your FICO score%26#039;s sake, and just don%26#039;t charge against them

--you can have your credit pulled as many times as you want within a 30-day period and it will only count as one inquiry

--you%26#039;re entitled to one FREE credit report (does not include FICO score, though) from each of the three credit bureaus every 12 months; i%26#039;ve done it and it%26#039;s legit; go to http://www.annualcreditreport.com

how to improve your score:

--pay down credit cards (that%26#039;s obvious)

--don%26#039;t close credit card accounts because capacity will decrease

--make payments on time (another obvious)

--slow down on opening new accounts

--have move revolving debt (credit card) to installment debt (fixed payments)

How is your credit score determined?

And now for the correct answer.

Credit scores are made up of the following;

1. Payment history 35%

2. Time in bureau 15%

3. Types of credit 10%

4. New credit 10%

5. Credit to debt ratio 30%

As you can see 1,2%26amp;5 are the most important as far as score is concerned, but you need much more then that you also need whats called a good profile.

The only way to achieve this is to have 3 credit card accounts (revolving) with balances below 30% of your credit limit and at least 2 autos, boats, furniture, homes or personal loans (installment) all with good long pay history%26#039;s.

I look at credit every day and see people with 700 scores that can not buy a car because their score is made up of 1 credit card with a $500.00 limit paid 15-times and a couple of student loans.

While this produces a great score it doe%26#039;s not show the ability or the willingness to actually pay anybody.