Score Good Using Your Free Credit Score

There are only a very few people who can afford to pay everything they want in cold cash

. If you are not among those few then you better make sure that you have a good credit score. You don't even have to pay to get your credit score because there are credit bureaus who can give you a free credit score. The idea here is that you should have an idea of your credit score before you apply for a loan, insurance, etc. so that you can improve it if it looks like it is not going to be approved.

Credit scores are how your creditors predict your paying behavior. Based on the three-digit summary of your credit report, they will approve or reject your loan application or give you a higher interest. The credit report score ranges from 300-850 and the lower your credit score is, the more your creditors read you as a high credit risk. Credit scores are also how department stores and electronic stores offer instant credits to customers. This score is usually computed using the method developed by Fair Isaac and Company or FICO but there are variants of this method that other companies may use.

The idea of a credit score that can be viewed by individuals as much as creditors was only recently implemented in 2001. This was due to the pressure given by the U.S. Congress, industry and consumer groups. Today, free credit score are now accessible via the web. Previously, your credit score can be provided for by credit bureaus for personal viewing but for a fee. Before 2001, credit bureaus did not think it necessary for individuals to view their credit scores because they thought it was too technical for an ordinary person to understand how it works.

If you are interested about your credit score ratings, you can understand them through percentages. The biggest share of your credit score, 35% of your total score, goes to your payment history since your creditors are primarily interested with how prompt you are in paying your bills. Your outstanding debt is the second largest taking 30% of your score and the more cards you have that are beyond their limits, the lower your score will be. The length of time that you have an established credit is 15% of your score and the longer you've had one, the better for your credit score because it provides more information for your credit history.

The last two categories for your credit score ratings equally divide the last 20%. Your new credits and credit inquiries takes 10% of the score and opening new credit accounts and much inquiries made on your credit will pull your score lower. The last category is the types of credits you currently have, taking the final 10%. This category reflects how experienced you are with different credit types and the more experience you have, the better for your credit score.

by: Leo Chu

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