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What is
a Credit Score?
Credit
score scores are the result of credit scoring systems used by lenders to decide whether you qualify for credit cards, loans or other financial services.
Credit
score scores are based on information in your credit file /
credit report,
which the lender accesses through a Credit Reporting Agency. The Credit Reporting Agency analyzes your
credit file
/ credit report then
applies a mathematical
equation to determine your credit
score.
This
credit scoring system
has become the gold standard used by the financials when extending "credit" to
consumers.
Credit score scores are,
therefore, an estimate of the risk to the lender in providing loans, credit cards
and other financial services. Lenders consider your credit score a good barometer of how likely (or
unlikely) you will be able to make payments
over the term of any Credit
Agreement. Generally, the higher your credit
score, the less risk you represent.
Factors affecting your
credit score
The Credit Reporting Agencies use many different formulas to calculate
credit score scores, however, most
credit score scores are based on the following factors:
Payment history
A record of late payments on your current and past credit accounts will lower your
score.
In general, a longer credit history is better.
Public records
Matters of public record such as bankruptcies, judgments and collection items may lower your
score.
Outstanding debt
Credit history
Owing too much will lower your score, especially if you're approaching your total
credit limit.
New accounts
Opening multiple new accounts in a short period of time may lower your
score.
Accounts in Use
The presence of too many open accounts can lower your score, whether you're using the accounts or not.
Enquiries
Whenever someone else gets your credit report - a lender, landlord, or insurer, for example
- an Enquiry is recorded on your credit
report. A large number of recent
enquiries may lower your score.
Other Credit Scores
The most commonly used credit score is a
FICO credit score, used by over 70% of the nation's creditors to make financial decisions about consumers. To learn more about
FICO scores, visit:
What is a
Beacon / FICO
Score.
Want to know your Credit Score?
This site provides you with your current FICO credit score and a copy of your
Credit Report.
Quick Improve Your Credit Scoring Tips
1) Obtain Your Credit FICO Score
2) Make any credit corrections with the proper documentation
3) Pay off small balances on high limit credit cards
4) Consolidate credit card bills onto fewer credit cards
5) Cancel certain credit cards and shift the balances onto fewer cards. (Shifting small balances to fewer cards raises the ratio of your unpaid balances).
Find out how to get your
free annual credit report
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