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.
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 per 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