Your Credit Score and How to Fix It

Your credit score is more important than many people realize and can mean the difference between not only getting good rates on a loan; it could also affect your future employment opportunities. You need to know not only what your credit score is, but also why it is important and how you can fix it.

Where Your Credit Scores Come From

If you are going to work on improving your credit score, it makes sense that you must understand what your credit score is and how it works. Without having this information, you are not going to be able to effectively improve your score.

Overall, your credit score is a number that lets lenders know how much of a credit risk you are. The credit score is a number, usually between 300 and 850, that lets lenders know how well you are currently paying off your debts and how much of a credit risk you might bee.

Basically, the higher your credit score, the more likely you are to be given credit at great rates. Scores in the low 600s and below will often hinder your chances at getting credit or get you credit at high interest rates, while scores of 720 and above will generally give you the best interest rates out there. However, credit scores are a lot like GPAs or SAT scores from college days - while they give lenders a quick snapshot of how you are doing, they can be interpreted by people in different ways. Some lenders put more emphasis on credit scores than others.

Some lenders will work with you if you have credit scores that are in the 600s, while others offer their best rates only to those creditors with very high scores. Some will look at your entire credit report while others will accept or reject your loan application based solely on your credit score.

The credit score is based on your credit report, which contains a history of your past debts and repayments. Credit bureaus use computers and mathematical calculations to arrive at a credit score from the information contained in your credit report.

Each credit bureau uses different methods to do this (which is why you will have different scores with different companies) but most credit bureaus use the FICO system. FICO is an acronym for the credit score calculating software offered by Fair Isaac Corporation company. This is by far the most used software since the Fair Isaac Corporation developed the credit score model used by many in the financial industry and is still considered one of the leaders in the field.

In fact, credit scores are sometimes called FICO scores or FICO ratings, although it is important to understand that your score may be tabulated using different software.

Credit bureaus and lenders often look at general patterns. Since people with too many debts tend fall behind in payments, your credit score may suffer. Understanding this can help you in two ways:

First it will let you see that your credit score is not necessarily a personal reflection of how “good” or “bad” you are with money. Rather, it is a reflection of how well lenders and companies feel you will repay your bills - based on information gathered from studying other people.

Secondly, it will let you see that, in order to improve your credit score, you need to work on becoming the sort of debtor that studies have shown tends to repay their bills. This realization alone should help make credit repair far less stressful!

Credit reports are put together by credit bureaus, which use information from client companies. It works like this: credit bureaus have clients - such as credit card companies and utility companies, to name just two - who provide them with this information.

Once a file is started on you (i.e. once you open a bank account or have bills to pay) then information about you is stored in your record. If you are late paying a bill, the clients call the credit bureaus and note this. Any unpaid bills, overdue bills or other problems with credit count as “dings” on your credit report and affect your score.

Information such as what type of debt you have, how much debt you have, how regularly you pay your bills on time, and your credit accounts are all information that is used to calculate your credit score.

Your age, sex, and income do not count towards your credit score. The actual formula used by credit bureaus to calculate credit scores is a well-kept secret, but it is known that recent account activity, debts, length of credit, unpaid accounts, and types of credit are among the things that count the most in tabulating credit scores from a credit report.

The 3 Major Credit Bureaus

Credit Score Repair

Additional Credit Score Info

Quick Ways to Boost Your Credit Score

Be aware of . It can not only hurt your credit score; it can also destroy your finances.

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