As complicated as financial matters can be, they are still very important and it is equally important to determine what your credit score is. If you have any loans or credit cards, then these are considered credit accounts and that you have a credit account, which is a record of your money management. This data is usually filtered and used to calculate one’s credit score. Lenders typically use credit scores and credit reports to make their decisions on whether or not to extend credit to an individual.
An individual’s payment history usually comprises about 40% of his or her credit score while credit use makes up 20% of the credit score. The length of one’s credit history comprises 20% of their credit score and the total amount of their recently reported balances makes up 11% of the credit score. New credit accounts make up 5% of the credit score while the individual’s available credit comprises 3%. These values are all broken down to make up the individual’s credit score which typically ranges from 300 to 850. A higher number means the credit score is more than ideal. You can check with credit bureaus to know where your credit score falls. Credit scores that fall above 700 are usually considered more than favorable and if your credit score falls above this figure, it is a representation of better credit decisions. A high credit score will make creditors more confident of your ability to repay future debts as you have agreed.
The FICO score is one of the most renowned kinds of credit scores and it was developed by the Fair Isaac Corporation. FICO scores are used by multiple lenders.
Your payment history has the biggest effect on your credit score as it is an indication of how you manage your finances while also indicating how punctual you are in making your payments. Your credit history is also crucial because it shows the duration you have been managing your accounts, recent charges to your account, and when last you made your payments.
Your credit mix also refers to the various kinds of credit you have including mortgages and credit cards. Aside from the credit mix, your credit score will also be affected by the number of accounts you own.
There are three primary credit bureaus that are responsible for the collection and maintenance of customers’ credit reports in the United States. The credit reports are available to subscribers such as credit card companies, mortgage lenders, and landlords who are want to know if they can extend you credit. You may find yourself getting denied for new lines of credit and yet your credit score is very high. This could mean that you and your finance company or back are not looking at the same credit score. These subscribers do not work with every single credit agency meaning the credit report information in one report could differ slightly from the information in another report. You should check with all the credit bureaus to ensure all your credit score and credit report information is accurate.