Keep Your Credit Score in Good Standing

Anatomy of Your Credit Score

All of your debts, payments, credit card accounts and other financial history are distilled down into one number, your FICO credit score. All of the credit agencies calculate a score between 300 (extremely poor creditworthiness) and 850 (perfect credit). The average score is roughly 710. Your credit score may be used to determine the approval or denial of car loans, mortgages and other major credit purchases, as well as the interest rates available to you. Many individuals do not know their score or how it is calculated. Understanding what a credit score is made of will help you improve your score.

• The highest percentage, 35%, of your score is determined by payment history. Missing payments or frequently paying bills late will drastically lower your score. The good news is, FICO favors recent activity, so you can improve your score by making timely payments or working out payments plans that suit your budget.
• 30% of the FICO score is based on how much money you owe versus how much credit is available to you. Someone close to maxing out his or her credit cards is seen as a higher risk of default.
• 15% of your credit score is based on the length of your credit history. The longer your credit history the better.
• The type of credit you use determines 10% of the FICO score. Having many different types of credit, including mortgages, credit cards, car loans, revolving and installment credit, will generate a higher score.

• 10% of your FICO score includes searches for credit. Applying for many different types of credit over a short period of time can lower your score. Rate shopping for one specific type of loan should not have much impact on your score.  

If you need any assistance dealing with inaccurate information on your credit report or have questions, visit My LegalShield Associate