Your credit score, also called credit rating, indicates the likelihood of you being able to pay your debts. It helps lenders, banks and financial institutions decide whether to approve your applications such as: loans, mortgages, credit cards, Insurance – and what interest rates to quote you.
There are a few credit scores but the FICO credit score is used by most financial solution providers. The FICO credit scores range from 300 – 850. You have three FICO scores, one for each of the three credit bureaus: Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you.
Naturally, it is important to maintain a good credit score. Doing so will help you when you want to apply for insurance, credit cards, loans and especially those considered long term, such as – a mortgage.
Your credit report is what determines your credit score and it summarizes the history of your credit actions. According to The Fair Credit Reporting Act (FCRA) you are granted, by government law, free access to your credit report once a year. You can get your free credit report at AnnualCreditReport.com.
Although the credit bureaus are obligated to give you a free copy of your credit report, once a year, they are NOT obligated to show you your credit score. You can view your credit score and monitor it with the help of credit monitoring services.
If you’re thinking to yourself: “I need to fix my credit“, then relax because everyone can raise their credit score, including you, regardless of how good or bad your credit ratings are.
For free detailed information and tutorials about credit scores, debt and how to repair your credit on your own, download the fix my credit guide. When you know how your credit score is calculated, repairing it will be easier. Here are some quick tips that will give you a head start with repairing your credit score.
- 35% Of Your Credit Score Depends On Your Payment History – If you are late with your payments on bills, such as a mortgage, credit cards or automobile loan, your FICO score will drop. To improve your credit score you will need to pay bills on time.
- 30% Of Your Credit Score Is Credit Utilization – How much debt are you in? Do you have more “available credit” then balances? To raise your credit score you will need to pay off debts. Always strive to have low credit card balances.
- 15% Accounts to the Length of your Credit History – The longer you have credit, assuming you pay your bills, the higher your FICO credit score will can be.
- 10% Depends On The Types Of Credit You Use – You need to use credit to get a high credit score. Installment such as mortgage loans, revolving credit such as credit cards and unsecured loans, or consumer finance for example – Insurance. The more types of credit you use and manage to pay them on time or ahead of time, the higher your credit score will be.
- 10% Is Determined by Recent Search for Credit and/or Amount of Credit Obtained Recently – Inquiring new credit, such as credit cards, retail store accounts, and personal loans, can hurt your score. Furthermore, applying for lots of new credit in a short period of time is viewed as risky and can cause a drop in your credit score. However, if you are shopping for a mortgage or auto loan (which requires a credit check) over a short period, you will most likely not experience a decrease in your scores.