What Is A Credit Score

What Is A Credit Score – Your credit score or FICO score, is evaluated from the various information that is in your credit file. Your FICO score is used by a lender to help them determine whether you might qualify for a particular credit card, loan, or service. Most credit scores estimate the risk a company incurs by lending you money or providing them with a service. In other words, the likelihood that you would make your payments on time in the future. The higher your credit score, the less risk you represent to a lender.

The following Five components make up your credit score:

Paying Your Bills On Time is 35% of your credit score number. It is the most important factor. If you have a history of late payments, your credit score will suffer.

Amount And Type Of Debt makes up another 30% of your credit score. Here is better to have high credit limits and a low balance. Revolving credit weighs more than a mortage or car loan because it is open credit. With revolving credit you are always borrowing and paying back over and over.

Length Of Credit History is worth 10% of your credit score. The longer you have the account the better, whether you use it or not. Closing an old department store credit card would actully lower your credit score.

Variety Of Credit Accounts is 10% of your credit score. If all you have are credit cards, your score will be lower. But if you have a couple credit cards, a car loan, a student loan and a mortage, your credit score would come in much higher.

The Number Of Accounts Recently Opened makes up the last 10% of your total credit score. If in the last six months you have been applying for every exciting credit card offer that comes in the mail, your credit score will most certainly take a nose dive.

What Is A Credit Score

Keep in mind that the credit score number you saw last year, or even last month for that matter, was a snapshot of your credit file at that moment in time. Credit scores are fluid and can change anytime your credit report file is updated with new information. What is a credit score? Bottom line, your credit score is a number that ranges from 300 to 850 and the higher the number the more financially responsible you are. Get your credit report and credit score today.

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