subject: Credit Score-what Is It And How To Improve It [print this page] Credit Score for people in the U.S is everything. It is something that you must look after because if you dont you may find it hard to get gas line, phone or cable line set up in your home. You may also find it hard getting certain jobs as some companies do a credit check on you before they hire anyone, even if you have all the qualifications required for the job, you may not get it if you have a bad credit rating.
Your credit score is also used by creditors, such as loan companies, credit card companies and banks. Simply put, if you were looking for a loan, for a car or college fees, if you have low or bad credit score you are less likely to be approved for that loan, or the types of loans you may be able to get would probably have very high interest rates. And the same can be said for when you try to obtain a credit card. If you are looking to get a credit card from either an individual credit card company or a bank that issues credit cards, they will analyze your credit score before they can approve your application. Whereas if you have a high credit score, this means that you are able to get loans with lower interest rates, or good credit card deals with a lot of extra features, and will no doubt be offered a card with low interest on every purchase you make with that credit card.
Whatever type of credit you are looking for, whether it be a car loan, mortgage or any other type of credit, your credit score will play a huge role in deciding whether or not that company will approve your application, and it also helps the company decided what kind of interest rate they want you to pay. This is why it is crucial for you to maintain a high credit score rating.
What is a credit score? A credit score represents a three digit number from 300-850. This number will tell a company whether or not you are likely to pay your bills on time or not, going by what other companies you may have dealt with in the past say about your capability to pay them on time. Which means if you have paid your other bills on time for the majority of the period you were with that company, your score rating will be higher, and so creditors will be reassured by this number that you will in turn, repay them.
In the United States, FICO or Fair Isaac Corporation is the best-known credit score model in the country. They calculate your credit score using a formula developed by FICO. The system is used primarily by credit industries and consumer banking industries all across the country.
Credit scores are calculated in the following factors:
Punctuality of payments This will be 35% of the calculation. If you pay your bills on time or before the due date, your credit score will tend to be higher.
Capacity used This will amount to 30% of the calculation of your credit score. It will contain a ration between the current revolving debts to total available revolving credit. If you use your credit card and if you dont use its entire credit limit, you will get a higher credit score.
Length of credit history This will amount to 15% of the calculation of your credit score.
Types of credit used This can affect 10% of your total credit score.
Recent search for credit or the amount of credit obtained recently This will amount to 10% of the total calculation of your credit score.
Surprisingly, not many people know their credit score and often end up wondering why they got denied for their loan or credit card application. You can easily obtain a copy of your credit report by requesting for it from FICO or from the credit reporting agencies. They will be able to provide you with a free calculation of your credit score every year. It is also a great way to find out if there are any errors in your credit report that may be causing you to have a low credit score. You can request it to be fixed in order to let you have a higher credit score than before.
Always remember that your credit score is an important factor of your life. Keep it high and you will get better deals on loans, and credit cards. And the best way to keep it high, is to repay loans or any credit you may have on time.
