Credit Scores

A credit score is a set of statistics used by creditors to assess an individual's credit worthiness based on their credit history and current credit standing.

Your credit report contains information about your credit history. This includes your payment history, the type of accounts you have and the total credit history of those accounts. Moreover, if you have had any late payments, collections, outstanding balances and the age of your accounts.

What Is A Good Credit Score?

Creditors compare your credit history to the credit performance of individuals with similar profiles. Points are given for each factor and that helps to determine who is most likely to repay a debt. Meaning, your credit score reflects your credit worthiness. Credit worthiness simply shows how likely your are to repay your debts on time.

How Are Credit Scores Calculated?

Many factors are used to calculate a credit score. However, there are five (5) main categories that are consistently used by all three (3) credit bureaus. They are:

• Payment history
• Outstanding debt
• Credit history
• New credit inquiries
• Types of credit in use

While the above list is a brief description of what goes into calculating a credit score, they are determining factors an individual has control over in regards to how we choose to use credit.

The Perfect Credit Score

The following factors can contribute as to why an individual may not have a perfect credit score. Each time a credit report is generated for a creditor or lender, the top four reasons are listed, regardless of if they reflect poor credit or good credit. The bottom line is a solid history of on-time payments to creditors will more than likely result in a good score.

Possible credit score factors:

• Amount balances owed are too high.
• Delinquency on accounts.
• Too many accounts with balances.
• Too many recent inquiries.
• Too many accounts opened.
• Current account balances too high.
• Amount owed on current accounts too high.
• Time since delinquency is too recent.
• Length of credit history is too short.
• Number of accounts with delinquency.
• Too few accounts currently paid as agreed.

Because your credit history is used to compute your present credit score, it is a good idea to regularly monitor your credit report. Click Here for more information on how to receive your credit reports.

How Do I Improve My Credit Score?

Your credit score can vary from month to month, so it is important to take control of how you use credit. Credit scores are computed based in the available credit data at the time of a creditors inquiry. List below are some simple but effective techniques you can implement to improve your credit score.

• Pay your bills consistently and on time.
• Monitor your credit report and remove any errors.
• Maintain a reasonable amount of debt.
• Maintain a reasonable amount of unused credit.
• Limit credit inquiries.

While the information contained on this page is basic common sense, we sometimes find ourselves not listening to it. A practical approach to credit will absolutely result in a higher credit score.