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What Makes Up a Credit Score?
Fair Issue Corporation (hence its other name of FICO score) determines
your credit report by an algorithm.
Credit Bureaus
like Equifax ( Get Equifax Credit Watch Gold 3-in-1 Now!
 ),
Experian and
TransUnion collect and report
financial histories. While, the exact formula used to calculate your
credit score is a tightly guarded industry secret, these companies provide
general guidelines about financial behavior that can affect your credit
score.
Credit scores are used
extensively, and if you've gotten a mortgage, a car loan, a credit card or
auto insurance, the rate you received was directly related to your credit
score. The higher the number, the better you look to lenders. People with
the highest scores get the lowest interest rates
The final number is
a composite of individual ratings in five categories
-
Payment history
(35% of the rating)
-
Length of credit
history (15%)
-
New credit (10%)
-
Types of credit
used (10%)
-
Debt (30%)
Keep the Credit
Score High - Enjoy additional loan benefits.
How to Build a Good
Credit Score
Your credit score is based multiple factors. Everything starts with your
income. The higher your income the more credit you can take on without a
hit to your credit score. Additionally, higher income allows you to have
more revolving credit outstanding without taking a hit to your credit
score.
Another factor is the length of your credit history. In this case the
longer you have history the better. One easy way to keep your score higher
is to maintain old credit cards. Even if you want to move on, closing that
account that has been open for five or ten years will affect your score
negatively. It is best to keep a zero balance on this account, use it for
one purchase every three or four months, and request your balance lower to
the minimum allowable.
Why One Should have Good
Credit Score
Two very important
issues stand out. First, if ever you need a loan for any reason, having
good credit is key. Another more recent credit issue citizens are facing
is in the work place. Many employers are now checking their new hires'
credit reports during the pre-employment screening process.
Benefits of Good credit
Score
-
Lower rate of
Interest
-
Less documentation
less hassles
-
The ability to shop
around
-
More types of loans
at attractive terms
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