Credit Score Tips

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1 Credit Score
2 Most Important Tips
3 General organizing Tips
4 Tips to Improve Your Credit Score
5 Effects of Credit Score
6 Credit Score Breakup
7 Credit Agencies
8 Check List
9 Source/Reference
10 Authors

Credit Score

A credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person, which is the perceived likelihood that the person will pay debts in a timely manner. A credit score is primarily based on credit report information typically sourced from credit bureaus / credit reference agencies.

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Most Important Tips

Payment History- Approximately 35% of a credit score may be based upon payment history. A credit score is negatively impacted if bills are paid late or if there is a history of delinquent payments listed on the credit report, including matters of public record such as bankruptcy, collection accounts, etc.
Amounts Owed- Approximately 30% of a credit score may be based upon amounts owed or other outstanding debt. A credit score can be negatively impacted if the amount owed is close to the credit limit. A low balance on two credit cards may be better than a high balance on one credit card.
Length of Credit History- Approximately 15% of a credit score may be based upon length of credit history. A credit score can be positively impacted the longer that accounts have been open, especially if they are with one financial institution.
Types of Credit in Use- Approximately 10% of a credit score may be based upon the types of credit currently in use by a consumer. A credit score is usually negatively impacted by loans from finance companies.
Taking on More Debt- Approximately 10% of a credit score may be based upon how much new debt a consumer is incurring. A credit score may be negatively impacted if someone has recently applied for a number of new credit accounts.

Promotional inquiries usually do not negatively impact a credit score.

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General organizing Tips

What is the best score- If you have a score of 760 or above, consider that an “A” on your credit report. You will get the best credit rates. Above scores of 700, a “B” and between scores of 600 and 700, a “C” can be considered. Below 600 is a big “D” or even an “F” and you will almost surely have to pay higher interest rates with a grade like that.

Credit score varies-It is important for you to remember that your credit score isn't static. It will go up if you pay your bills on time and it will go down if you don’t pay your bills on time and create a negative credit report. Your credit rating or your credit score changes all the time. This is why it is very important for you to pay your bills on time, such as your loan, and your credit card bills in order to continually raise your credit score.
How is the credit score calculated?- Your score may be different at each credit reporting agency, since the information they have on you may differ, or the statistical pool they are drawing from may be different. But they all use the same software to generate your score. You may hear your credit score referred to as a FICO score. That is because most scores are determined using software developed by Fair Isaac and Company.

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Tips to Improve Your Credit Score

Credit scores aren't static numbers. Because they are calculated based on your current credit report, they change every time your credit report changes. While this change may be very slight, it can also be much more dramatic. Here are some things some financial advisers say to do to try to improve your score:

Review your credit report and correct any errors you find. Getting rid of inaccurate (and bad) information can sometimes improve your score dramatically.
Creditors also now look at the average age of your accounts so, again, keep those old accounts.
Reduce your balances on credit cards to 75% or less of your available credit (25% is preferable).
Pay your bills on time.
Don't let anyone make an inquiry on your credit report unless you absolutely have to. The more the number of inquiries, the lower is your credit score.
Don’t open new credit card accounts just to increase your available credit in the hopes of raising your score.

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Effects of Credit Score

Your credit score doesn't just affect whether or not you get a loan; it also affects how much that loan is going to cost you. As your credit score increases, your credit risk decreases. This means your interest rate decreases.
There are other factors that influence the interest rate you get for a loan besides your credit score. Things like the type of property you are using the loan to buy, how much of your own money (equity) is going into it, the costs the lender has to make the loan, etc.

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Credit Score Breakup

The credit score can range from 300 to 900. The formula for exactly how the score is calculated is proprietary information and owned by Fair Isaac. Here, however, is an approximate breakdown of how it is determined: 1. 35 percent of the score is based on your payment history. 2. 30 percent of the score is based on outstanding debt. 3. 15 percent of the score is based on the length of time you've had credit. 4. 10 percent of the score is based on the number of inquiries on your report. 5. 10 percent of the score is based on the types of credit you currently have.

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