Your credit score is a score generated by a complex formula, which takes into account many factors- such as length of time since credit was established, balance to limits, payments made on time or exactly how late payments are, if there are any collection accounts, number and frequency of inquiries, and what types of accounts (Revolving or installment). These factors and others make up your credit score, a score between 350 and 850, which creditors use in underwriting your mortgage, car loan, credit cards, insurance and many other things.
Your credit score is central in determining whether you get approved for loan and under what terms the loan will be granted. According to Fair Isaac’s Web site, the difference between a score of 520 and 720 is approximately 3.5%.
The credit score can be increased by doing certain things. What these certain things are vary from individual to individual. The reason that each individual is different is because each individual’s credit is usually somewhat different and therefore, the solutions to improve the score are different.
THE KEY FACTORS IN CREDIT SCORING
What goes into the score? Everything in your credit report, with different kinds of information carrying differing weights. The model looks at more than 20 factors in five categories
1. How You Pay Your Bills (35% of the score)
The most important factor is how you’ve paid you bills in the past, placing the most emphasis on recent activity. Paying all your bills on time is good. Paying them late on a consistent basis is bad. Having accounts that were sent to collections is worse. Declaring bankruptcy is worst of all.
2. Percentage of Balance to Limits (35% of the score)
The second most important area is your outstanding debt are Revolving lines of credit. However installment loan balances also do make a difference. How high you balance is to your credit limit.
3. Credit history (15%)
The third factor is the length of your credit history. The longer you’ve had credit the more points you get.
4. Mix of credit (10 %)
The best scores will have a mix of both revolving credit, such as credit cards, and installment credit, such as mortgages and car loans.
5. Inquiries (10 %)
The final category is your interest in new credit—how many credit applications you’re filling out. The model compensates for people who are rate shopping for the best mortgage or car loans.
Below is a list of contact information for the credit bureaus:
Equifax: 800-685-1111 www.credit.equifax.com
Trans Union: 800-916-8800 www.transunion.com
Experian: 888-397-3742 www.experian.com
This is the link to take you to Consumer Financial Protection Bureau:
(CFPB)http://www.consumerfinance.gov/askcfpb/search/?selected_facets=tag_exact%3AFair+Credit+Reporting+Act