Understanding Your Credit Score

Your credit score can determine several things, including whether or not you are able to purchase a car or home, or even get a job at certain companies. Having a high credit score is essential to being able to secure various loans and other financial products or services. There are several factors that go into determining what a person’s credit score is. Most credit reports look at something called a FICO score. These scores can range from poor (300) to excellent (850). Most of the time, a consumer needs to have an average FICO or credit score of 650 or above in order to secure credit.

The scale used for credit scoring take a number of different things into account. On-time payment to current creditors with no late payments accounts for about 35% of your overall score. Another 30% of your score relates to your current amount of credit versus how much of that credit is being used. In other words, if you have $20,000 in credit, and your current balance is $19,000, your score would not be as high as someone with a balance of around $10,000. Other factors include the length of time you have had any kind of credit, and your payment history. Generally those who have had credit of some kind for more years, with a positive payment history, will be offered more credit than those who are new to credit.

Another factor which accounts for about ten percent of someone’s FICO score is the type of credit they have. Revolving credit or unsecured debt like credit cards do not carry as much power as actual loans for a home or car. This type of credit is called secured debt. The remaining ten percent of credit scoring involves a person’s pursuit of credit. If you’ve been applying for credit non-stop, this will show on your credit report and score. Paying down debts, making sure all payments are on time, and keeping your debt-to-income ratio low are all ways you can help improve and maintain your credit score. Avoid overspending and try to pay more than your monthly minimum to help keep your rating up.

For more information on credit and credit scores, please refer to the following websites: