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Myths and Truth about Credit Scoring
Credit score is the key factor determining approval of almost
any type of credit. It is based on the information contained in
your credit report files. The widely used FICO score was
developed by Fair Isaac Corporation, and it is a formula which
assesses your potential credit risk.
The information used to calculate credit score can be broken
down into five major parts. Your payment history with banks and
other lenders will account for 35% of the score, the amount of
money you owe for 30%, and the length of your credit history for
15%. New credit and a statistical assessment of how healthy your
credit mix is will both account for 10%.
Credit score is not based in any way on the following
information:
- references to debt management or credit counseling
programs.
- person's marital status.
- current employment status, including how long with the same
employer.
- credit report inquiries made by you, employers, insurance
companies, or banks if made without your knowledge.
- what interest rates are charged on your credit cards, etc. -
public assistance received.
- person's age.
- child or family support received.
You can increase your score by:
- always paying bills on time.
- paying off or reducing credit card and other debt.
- keeping old, unused credit cards, departments store cards and
other "revolving" credit accounts open, even if you don't use
them.
- not applying for credit very often.
- correcting mistakes on your credit reports.
Banks decisions are made according to their own standards.
While the majority of lenders use credit score as a key factor
in approving credit, other facts play their parts as well, among
them: your income, employment status and length of time at
present address, to name a few. Each bank has its own standards.
What score is acceptable for a particular loan or credit product
depends solely on a lender. The person's credit score might not
be high enough to get credit with one bank, and perfectly
acceptable with another.
More about credit score and tips on improving your credit can
be found at: How Much? - Comparing financial products.
Senior staff member for How Much?
http://www.howmuchanswers.com/
MORE RESOURCES:
Credit - Google News
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