Manage Your Credit Health By Understanding Your Credit Score

While most people may know their credit history when they look at their credit report, 70 percent do not have an idea that they have a credit score. And this three-digit numbers may get in the way between you and your important loans. You may see what is in your credit report but understanding your credit score is a vital part of your credit health.

Why do you need to understand your credit score if you check your credit report on a regular basis? It is because most mortgage lenders and large financial lending institutions will want to know your credit risk level when applying for credit. Their assessment and approval process for credit application depends on your credit score. FICO scores are the most widely-used credit scores. Even though other companies have their own version of a credit score, FICO scores remain to be the most-used score. As a matter of fact, most people refer to their credit scores as FICO score. Other version of credit score may be used by lenders to view your credit, but if you really want lenders to see you, check your FICO score.

A credit score is a three digit number used to help lenders decide. The highest score is 850 and the lowest is 300. Acceptable credit score should be at least 720 or above. If you have a credit score of 720, you do not have to worry about increasing the number as lenders put you in the same group of people with credit score of 800-820.  Also, lenders find it acceptable and normally get loan approval without problem and at a low interest rate. However, if your number is below 700, you need to try pumping your numbers up. You will not have a clear view of your credit health unless you know your FICO score.

How is your FICO score determined? Let’s begin with payment history, which takes 35 percent of the scoring criteria. Your payment history should indicate on time payments and no missed payments on any accounts that you have because this is the most important information lenders look for.

30 percent goes to the amount you owe to the total amount of the credit available. If you are closer to maxing out all your credit, it would only leave a negative impression to lenders and this can lower your credit score.

The length of credit history takes 15 percent of the scoring procedures. Your long time accounts will help your credit score.

New credit takes 10 percent of the scoring. Opening several new credit accounts in a short span of time can pull your credit score down.

Lastly, 10 percent goes for the types of credit you use. Mix of credit cards, finance and mortgage loans and retail accounts are sure to be considered by lenders.

Now that you know how the scoring is determined, you should get your FICO score now and learn how to improve it. You can obtain your FICO score using Fair Isaac’s myFICO service. Also, you get your credit report when you order for your FICO score by myFICO service, plus tips on increasing your score. Keep your credit healthy by understanding your credit score.