Control Your Credit, Protect Your Future
- Credit Reports
- What is a Credit Report?
- What is a 3 in 1 Credit Report?
- Checking your Credit Report
- Credit Report Errors
- What is a Credit Bureau?
- What types of Credit Reports are there?
- Who can access my Credit Report?
- What info is on a Credit Report?
- Do all bureaus have the same information?
- Credit Report Glossary
- Credit Scores
- What is a Credit Score?
- Average Credit Scores by State
- How to improve my credit score?
- What affects my credit score?
- How do I get my credit score?
What Is Your Credit Score and How Is It Computed?
CreditReport.com
When it comes to your financial future, your credit score is as important as your social security number. Your three-digit credit score is a quick measurement of your creditworthiness. It is the first (and sometimes the only) factor lenders look at when deciding whether or not to grant you credit. So needless to say, if you want to secure a smooth financial future full of low interest rates, you should be aware of this important number.
The basic principle behind a credit score is this: Credit Past + Credit Present predicts Credit Future. Credit scores are calculated based on the information in your credit report, including:
- Payment history
- Amount of credit currently being used
- Amount of available credit
- Length of credit history
- Recent requests for credit
Credit scores do not take into account gender, marital status, national origin, religion or race as factors.
The calculation of a credit score involves awarding points based on certain aspects of your credit report and then comparing that value to consumers with similar financial profiles. The score weighs some parts of your credit report more heavily than others. In general, payment history contributes to 35% of a credit score, amounts owed to 30%, length of credit history to 15%, and types of credit used and new credit each contribute to 10%.
Your credit score: An elusive magical number
The original scoring model was developed in the 1950's. Since then, many other scoring models have been developed and dozens are in use today, with more on the way. Some creditors even use their own scoring models for different types of credit.
With so many scoring models in use, score ranges can be as broad as 150 to 930. A "good" score using one scoring model will generally be a good score across all scoring models-but the actual number will be different. The credit score itself is not as crucial as where the number falls on the scale.
Luckily, credit scores are not carved in stone. The value of your credit score can fluctuate as your credit report changes, and sometimes it can change daily. Credit scores can also vary between the three national credit bureaus because different lenders report to different bureaus, so it’s a good idea for you to obtain a 3-in-1 credit report and credit score.
Although credit scores are important and a good gauge of your creditworthiness, a low credit score is not the end of your financial world. The best way to deal with a less than stellar credit score is to concentrate on good credit habits that will raise the number over time.
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