Credit Scores: The facts you should know

In order to receive easy credit you always require an impressive credit score. All the lenders use your credit score to judge your creditworthiness and they approve your loans only after checking the score.

There are several credit scores, which are offered by different credit bureaus and are calculated using different credit scoring models. But the score, on which most of the lenders rely, is the FICO score, designed by Fair Isaac Corporation. Equifax, TransUnion and Experian, the major three credit reporting agencies of US offer this FICO score.

If you want to maintain a high FICO score, first you need to know how they are calculated and for that you can check out the following points:

• Your payment history determines your FICO score by 35%. If there are incidents of late payment and payment default in your credit history, then your FICO score is affected negatively. On the other hand, records of on-time payments can increase your FICO credit score.

• The total amount of debt, you owe, affects your credit score by 30%. A high debt to credit limit ratio can adversely affect your score.

• The length of your credit history can influence your FICO score by 15%. If you hold a long credit history, then you are supposed to achieve a high credit score.

• The total number of your newly opened credit accounts and number of your credit inquiries can affect the score by 10%. If you make several credit inquiries in a short period of time, then it can lower your FICO score.

• Your credit profile also determines your credit score by 10%. If you have a diversified credit profile i.e. if you hold different types of credit like installment loans, mortgage loans, revolving line of credit and credit cards then you are likely to achieve a higher FICO score.