Credit scores are the lifeline of your financial health. Established in 1993, credit score is a number that assists lenders and others determine how likely you are to make credit payments on time. The scores are based upon the information provided in your credit report.
Credit or FICO scores range from 300-850 and are determined by five factors:
1. Your payment history (appx. 35%)
2. How much you owe (appx. 30%)
3. Length of credit history (appx. 15%)
4. New credit (appx. 10%)
5. Other factors (appx. 10%)
There are some thing sthat you can do that can improve your credit score:
1. Do not open new accounts unnecessarily
2. Establish a variety of credit types (revolving, installment, 30-day accounts)
3. Don't max out your credit limit
4. Reduce your debt on credit cards below 25% of the credit limit. (For example, have a balance of $2,500 or lower on a credit line of $10,000)
Make sure to make your payments on time. Credit scores are vulnerable and a 30-day late payment can knock your scored down by as much as 80 points.
Credit scores are important to whether or not you can obtain a loan and will determine your interest rate if you are able to obtain it.