There are certain numbers that are important in life and others that are irrelevant. One very important number in your life that you need to make as good as possible is your credit score number. The impact a poor credit report score number can have on you financially is incredible.   So you should do whatever you can to improve your credit score.

How Credit Scoring Is Used

Financially Responsible.

  • Lenders, insurance companies, landlords, credit reporting agencies, employers and utility company’s all use your credit score number to evaluate how financially responsible you are.  They use your score to determine if they even want to do business with you.
  • Your credit score is used to determine how much to charge you for their services.  High credit scores win because high credit scores show that you are responsible so you get charged less for the same services as someone with low credit scores.

FICO.

  • What is FICO and why should you care?
  • FICO is one of the most widely used credit scoring models.  The FICO credit scoring model breaks down the impact on credit scores in order of importance:  35% of your score is payment history, 30% debt ratio, 15% length of credit history, 10% types of credit and 10% number of credit inquiries.
  • Credit scoringThe largest chunk of your credit score is your payment history (35%).   If you always pay late, you chip away at your score, so always, always pay on time!!!   If you always pay late, you lower your credit score.
  • The second largest portion of your credit score (30%)  is based on how much you owe compared to your total available credit; this is called your debt ratio.  Teaching moment – do not put a lot on your credit cards, do not carry large credit card balances; this will lower your credit score.
  • Another factor that impacts your credit score number is the length of your credit history (15%).  Do not close your older credit cards, they can help your history. In addition, if you have taken on new credit and what types of credit (10%) you have (car loan, mortgage, adjustable loans) impacts your credit score number.

Your Credit Score

  • We all have a credit score; unless you never had a job, never took out a loan, never had a credit card, never had a mortgage or paid rent and always paid cash for everything.      And in today’s culture, that’s almost impossible.
  • Do you know your credit score?   You should.    You can find out your credit scores through the 3 credit reporting agencies.   And you can get free credit reports once a year.
  • Credit scores range from 300 – 850.   If your credit score is between 300 and 750, you are considered risky.   A score above 750 is a good credit score and a score of 850 is considered by creditors as perfect.    Your financial actions determine where you fall within the credit score ranges.
  • Your financial actions include:  do you pay your bills on time or are you always late, do you carry credit card balances or do you max out your credit cards?

Mistakes do happen, and that’s okay as long as you catch them and get them corrected. For example, an account could have been marked delinquent and it actually was not delinquent at all. That is why you should order your credit report once a year to check for errors. There is no reason not to order your credit report once a year from www.freecreditreport.com It’s easy so do it today; take the time to improve your credit score.