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Credit Score

What then, you ask, is a credit score? Your credit score is a mathematical compilation used to see just how credit worthy you are based on past and current credit accounts. Each credit reporting agency has its own system on how to score your credit but the scoring is basically the same. Creditors use the scores ( called FICO scores ) as a factor in deciding whether or not to give you the credit you are asking for. The lowest credit score is a 375 and the highest a 900. Depending on your creditor’s requirements, you must have a minimum of some FICO score to obtain credit through that company. The higher your FICO score is, the better chance you have to obtain credit because the risk to the company extending your credit is low. The average FICO score is between 620 and 650. Anything under a 620 will mean that your creditor will consider you a high-credit-risk and this could lead to your being denied credit from the company. Credit may still be obtained, but you might face higher interest rates or even a long loan-processing requirement. The factors that will make your FICO score fluctuate are your payment history on past and current debts, public records ( such as bankruptcy or negative accounts such as collection accounts or repossession ), the outstanding debt you currently have, how many inquires have been made into your credit, the type of credit you have, and your credit history itself.

A company may see that you owe too much right now, or that your debt to income ratio is too high, for it to offer you credit. From your score and your credit report, you may have too many accounts with high balances, too many new accounts, or you may have credit that is simply inexistent – meaning that you have not actually used a creditor that has reported to the credit reporting agencies. Once you know your credit score and have looked at your credit report, you can help yourself to have better credit and a better credit rating with the FICO score. Some ways to improve your score include keeping the debt you have at a minimal level, paying your bills on time, checking your credit report for errors and having errors removed, and avoiding too many inquires.

Once you have viewed your credit report, you can then determine if there are errors. If you see something that just doesn’t look right, you need to act immediately. One of the most important and neglected rights that a person has is not just to get a free copy of your credit report, but to dispute items that are incorrect on your credit report you receive. You should follow the guidelines on the credit report you receive as to making a dispute about an error or mistake on your report. Each credit reporting agency will require that you follow that agency’s guidelines in the removal of an error or mistake on your credit report. Simply knowing your score is not enough…you have to take action and correct negative points on your credit report and correct the errors, to improve your FICO credit score

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