subject: Credit Score The Mystery On Determining Your Credit Score [print this page] Have you ever wondered what exactly goes into that three-digit number commonly referred to as your credit score? When youre applying for a loan or credit card, this is one of the major pieces of information that lenders use to decide whether to lend to you and what interest rate you will pay. Understanding the mystery behind it can put you in a better position to manage credit in a way that improves your score. Here are the five major components that make up your credit score.
1. Payment History: This is the single largest factor, and youll have a great payment history if you pay all of your bills on time every month. Missed payments, collection accounts, foreclosure, bankruptcy, and tax liens all hurt the payment history portion of your credit score.
2. Amount Owed: The less you owe, particularly in relation to what you first borrowed on a loan or could borrow on a credit card, the better your credit score. Keeping your credit card balances low is the best way to have a good record in this area.
3. Length of History: Theres not a lot you can do to affect your overall credit history length besides keeping your oldest credit cards open. This portion of your score rewards you if youve been managing credit for a longer time.
4. Types of Credit: Using multiple types of credit, including credit cards, auto loans, and a mortgage, can give you a broader credit profile. Youll have a lower score if you only use one type of credit.
5. New Credit: Your credit score fluctuates based on how recently youve applied for or opened new credit accounts. This is because new accounts show that youre adding more debt and may be strapped for cash.
The exact formula to determine your credit score is not public, but you can improve your score by focusing on each of these areas. Here at CreditNowUSA, we want to help you understand what your score is and how to make it better.
For more information, go to Credit Score at http://www.creditnowusa.com/Credit-Score
