Your Credit Score Rating And What It Means To You
Jay Anderson
You have probably heard of credit scores and ratings but if you are like most people, you probably do not have a good feel for what a credit score rating really means to you. The problem with this is that what you don't know can hurt you and negatively impact your financial status. The information is not a secret and you should take the time to find out what your credit score is, and as is possible in almost all situations, put forth the effort to improve your credit score rating. This is frequently also called a FICO score based on the company that developed the formula to create the scoring system.
Your credit score affects virtually every area of your life, and is not even limited to financial things. For example, a poor credit score can cause you to pay more for car insurance and even prevent you from getting that new job. By contrast, a high credit score makes it much easier for you to be approved for attractive loan and credit programs and makes many areas of your life much easier.
A special formula is used to calculate the three digit number which represents your credit score. Typically these numbers are between 300 and 850 as they are calculated using the FICO method. The score is derived by looking at various different factors for your credit and credit history. About 35% is related to your payment history and your on time payment performance. About 30% depends on the total amount of money that you currently have as outstanding debt. About 15% of the score relates to the length of time that you have a credit history available, or how long you have had these accounts. The remainder reflects new accounts recently opened and the number of different types of accounts you have.
If you have a credit score over 750, this is considered excellent credit and you would be considered a very good credit risk for potential lenders. The median or average score would be between 640 and 710, which would indicate generally good credit but with a couple blemishes in the past, which is where most people fall. Scores under about 590 would be considered a credit risk and may have trouble getting approved for new lines of credit.
Whether or not you qualify for a new loan or line of credit is determined by your credit score. This includes your eligibility for loans, mortgage, and credit cards, and what interest rate you will be assessed, or even if you will be approved or not. It can also affect whether you need to leave a deposit when renting a home or buying a car.
It should be your goal to raise your credit score and there are many things you can do. First and foremost, pay each of your bills on time every month, which will establish a good payment history. For your credit cards, keep your outstanding balance well below your credit limit, ideally around 30% of your credit limit or less. Take care to never exceed your credit limit. Do not open a bunch of new accounts over a short period of time, since this type of activity is easily seen on your credit report.
Your credit score rating is extremely important to you and impacts many more areas of your life than you even realize. Put forth the effort to understand what your score is and how to improve it so that your financial future can be much easier.
If you are interested in raising your
http://www.credit-help-center.com/ Credit Score Rating as well as getting a free copy of your credit reports to get you started with this, please visit our web site at
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