| You have probably heard of credit scores and ratings | | | | new accounts recently opened and the number of |
| but if you are like most people, you probably do not | | | | different types of accounts you have. |
| have a good feel for what a credit score rating really | | | | If you have a credit score over 750, this is considered |
| means to you. The problem with this is that what you | | | | excellent credit and you would be considered a very |
| don't know can hurt you and negatively impact your | | | | good credit risk for potential lenders. The median or |
| financial status. The information is not a secret and you | | | | average score would be between 640 and 710, which |
| should take the time to find out what your credit score | | | | would indicate generally good credit but with a couple |
| is, and as is possible in almost all situations, put forth the | | | | blemishes in the past, which is where most people fall. |
| effort to improve your credit score rating. This is | | | | Scores under about 590 would be considered a credit |
| frequently also called a FICO score based on the | | | | risk and may have trouble getting approved for new |
| company that developed the formula to create the | | | | lines of credit. |
| scoring system. | | | | Your credit score determines your credit worthiness in |
| Your credit score has an impact on just about every | | | | the eyes of the potential lender. It affects the amount |
| aspect of your financial life, and having a score that is | | | | of interest you will be charged, the maximum term that |
| calculated lower than it really should be has a negative | | | | the lender will offer, and even whether or not your |
| impact on you. When your score it high, your credit | | | | application will be approved. It can also determine |
| rating is also high and you typically have little problems | | | | whether or not you need to leave a deposit, even for |
| in getting approved for loans and new credit. The | | | | something like renting a home. |
| higher the number, the better qualified you appear to | | | | To raise your credit score, there are several things |
| be to potential lenders. | | | | you can do. The very first thing is to start paying each |
| A special formula is used to calculate the three digit | | | | and every one of your bills on time so that you create |
| number which represents your credit score. Typically | | | | a history of on time payments. Keep the outstanding |
| these numbers are between 300 and 850 as they are | | | | balance on your credit cards well below your credit |
| calculated using the FICO method. The score is | | | | limit, where the ideal amount is around 25% to 30% of |
| derived by looking at various different factors for your | | | | your credit limit. Avoid applying for new accounts all |
| credit and credit history. About 35% is related to your | | | | the time since having a lot of open accounts is |
| payment history and your on time payment | | | | negative. |
| performance. About 30% depends on the total amount | | | | As you can see, your credit score rating is extremely |
| of money that you currently have as outstanding debt. | | | | important. Take the time to find out what your score is |
| About 15% of the score relates to the length of time | | | | so you'll know how it is impacting your life. If your score |
| that you have a credit history available, or how long | | | | is less then satisfactory, then start working to improve |
| you have had these accounts. The remainder reflects | | | | it to insure a better financial future. |