Your Credit Score Rating and What It Means To You

Posted: 04 Feb 2008 | Categories: Credit

You have probably heard of credit scores and ratings but if you are like most people, you probably do not have a good feel for what a credit score rating really means to you. The problem with this is that what you don’t know can hurt you and negatively impact your financial status. The information is not a secret and you should take the time to find out what your credit score is, and as is possible in almost all situations, put forth the effort to improve your credit score rating. This is frequently also called a FICO score based on the company that developed the formula to create the scoring system.

Your credit score has an impact on just about every aspect of your financial life, and having a score that is calculated lower than it really should be has a negative impact on you. When your score it high, your credit rating is also high and you typically have little problems in getting approved for loans and new credit. The higher the number, the better qualified you appear to be to potential lenders.

A special formula is used to calculate the three digit number which represents your credit score. Typically these numbers are between 300 and 850 as they are calculated using the FICO method. The score is derived by looking at various different factors for your credit and credit history. About 35% is related to your payment history and your on time payment performance. About 30% depends on the total amount of money that you currently have as outstanding debt. About 15% of the score relates to the length of time that you have a credit history available, or how long you have had these accounts. The remainder reflects new accounts recently opened and the number of different types of accounts you have.

If you have a credit score over 750, this is considered excellent credit and you would be considered a very good credit risk for potential lenders. The median or average score would be between 640 and 710, which would indicate generally good credit but with a couple blemishes in the past, which is where most people fall. Scores under about 590 would be considered a credit risk and may have trouble getting approved for new lines of credit.

Your credit score determines your credit worthiness in the eyes of the potential lender. It affects the amount of interest you will be charged, the maximum term that the lender will offer, and even whether or not your application will be approved. It can also determine whether or not you need to leave a deposit, even for something like renting a home.

To raise your credit score, there are several things you can do. The very first thing is to start paying each and every one of your bills on time so that you create a history of on time payments. Keep the outstanding balance on your credit cards well below your credit limit, where the ideal amount is around 25% to 30% of your credit limit. Avoid applying for new accounts all the time since having a lot of open accounts is negative.

As you can see, your credit score rating is extremely important. Take the time to find out what your score is so you’ll know how it is impacting your life. If your score is less then satisfactory, then start working to improve it to insure a better financial future.

If you are interested in raising your Credit Score Rating as well as getting a free copy of your credit reports to get you started with this, please visit our web site at http://www.credit-help-center.com

Article Author :Jon_Arnold