The Simple Truth Behind How Your Credit Score Is Determined

Do you really know what a FICO score is and how its worked out? Even if you do know what it is it can be important to understand something about how it is calculated because then you can improve upon your current score thus improving your ability to gain credit and to gain credit on good terms too. The name “FICO” comes from a company named Fair, Isaac and Company, and it is used to assess credit worthiness of a consumer.

The Experian, Equifax, and Trans Union, are three of the most important credit bureaus in America and they function to keep track of all the lending and credit activities every person has. They determine the score that gives significance to a certain card holder and this score can range from 300 up to 850. Many businesses use this score for a lot of different things; a landlord will require this number to facilitate security deposits, insurance companies use this to be able to formulate rates, and employers make use of the credit score to determine whether a person seeking employment is a bad or a good risk.

What though determines the final FICO score? There are a number of factors taken into account and these are as follows:
* Payment history of the consumer. This totals just over a third of the whole FICO score so is very important. If a consumer has been late with some payments or not made some payments then this will adversely affect the score. The converse is also true here.

* Existing debts are also considered, and this make up another one-third of the credit score. The ratio of current debt to existing available credit is considered and this will reflect on the person’s score. Credit cards that have been maxed out are often very bad and it will definitely give a bad reflection of a person’s paying capacity.

* Length of credit history, type of credit and recent credit applications are all taken into account to make up the final 35% of the FICO score. Those who have used credit for a long period of time will be at an advantage here. Type of credit is assessed in that, if the consumer is to have a variety of different credit – house loan, car loan and a credit card, for example, then this would appear better than credit cards alone. Recent credit applications relates to if the consumer has made a number of recent requests for credit. This may appear that they are somewhat desperate for money and is not necessarly looked fondly upon with regards the FICO scoring.

All these help determine your credit score and this information can help you maintain better credit standing so that you may be a better candidate for a loan. Remember that should the need arise you need to be able keep a good score so that you can qualify for a loan; and this can only be accomplished if you maintain your credit standing.

There is more to learn about credit card help and a debt consolidation program to suit your needs.