How well do you understand the term credit score? Are you aware of how your score is calculate? What factors affect your credit rating? How can you raise your credit score? Let’s answer these questions one at a time.

You and Your Credit Score

Your credit score is the three digit number in your credit report. Scores range from 300 to 850. A rating of 600 and below is considered to be a low score while a rating of 650 and above means good credit.

Naturally, lending companies are looking for applicants with good credit history or high credit scores. If you have a low score, it’s best to work on raising your credit rating first before submitting your application.

Some lenders provide loans and credit cards for people with bad credit. However, these lenders may ask for higher interest rates and fees to make up for bad credit. On the other hand, a higher score gives you a stronger negotiating power when dealing with lenders.

What is FICO Score?

The FICO scoring system was made by Fair Isaac Company and is the recognized method of credit scoring today. The major credit bureaus as well as other lending companies use the FICO scoring system in calculating consumer credit.

What factors affect your credit score? Your final credit score is calculated based upon 5 categories and these are the following:

Payment history. This comprises 35% of your total score. Clearly, timely payment can significantly raise your credit rating.

Level of debt. This makes up 30% of your score. Financial experts advise not using more than 30%-40% of your given credit limit to avoid a falling score.

Length of credit. 15% of your total score depends on how long you’ve started building your credit. An older credit history proves your reliability when it comes to handling debt and repayment.

Credit Inquiries. 10% of your credit score is based on inquiries made on your report. Submitting too many applications to different companies can raise doubts to lenders and pull down your score.

Types of Credit. Lastly, the types of credit you have make up 10% of your score. Having more than one type of credit (ex. Credit card, mortgage, car loan) shows your ability to manage your finances effectively.

Allison May is a credit consultant and a writer for Credit Creators. The resource provides consumers with valuable advice and information on credit cards for bad credit,credit cards for good credit and other credit-related issues. Its main objective is to help people build good credit. Copyright © 2008

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By Allison May

Allison May is a credit consultant and a writer for Credit Creators. The resource provides consumers with valuable advice and information on Guaranteed Approval credit cards, Unsecured credit cards for Bad Credit and other credit-related issues. The main objective here is to help people build good credit. Add Allison on

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