How is Your Credit Score Measured?

How is Your Credit Score Measured?

How is Your Credit Score Measured?

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Written by Pat Johnson

Monday, 23 February 2009 10:32

While there is no guarantee that past performance is indicative of future behavior, this is the model lenders have employed with respect to credit worthiness. They use your credit score, which is a summary of your past loans, as a measure of how likely you are to repay your debts.

by PatJohnson

While there is no guarantee that past performance is indicative of future behavior, this is the model lenders have employed with respect to credit worthiness. They use your credit score, which is a summary of your past loans, as a measure of how likely you are to repay your debts.

Your credit report is put together by three main reporting agencies. These credit bureaus keep track of all credit accounts that have been opened in your name, their balances and the timeliness of your payments. Creditors and other businesses can query these agencies before the grant you credit or other services.

You are able to obtain a free copy of your credit report once a year. You will have to pay for a copy of your credit score, which is different. You can contact the reporting agencies directly to get your credit report

You may sometimes encounter your credit score being referred to as your FICO. This is because the Fair Isaac Corporation was among the first to create a credit scoring system. Lenders use this system differently in their adjudication of risk, but it is certainly near universally applied to some extent.

You should get a copy of your free credit report once a year to make sure that no mistakes have been made with it. While it is uncommon, it certainly does happen. Check the report to make sure that all of the accounts are indeed yours and that your name, address and birthday are correct. If you do find a mistake get it fixed right away. The sooner you do so they easier it is.

Because a lot of importance is placed on your credit rating, it is important that you make every effort to look after it. Be certain to make your payments on time, because missed payments above all else will have the most detrimental effect on your score.

After that too much outstanding credit will hurt your score as well. Do not over extend yourself with credit cards and do not bring the ones you do have to their limits. Frequent inquiries to your credit bureau can bring down your credit score so be careful not to unnecessarily apply for new loans or cards. Remember that it is much easier to lower your rating than it is to improve it so make your borrowing decisions wisely.

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For more further details about rating credit score scale and increasing your average FICO score please visit The Credit Camp.

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