What Are the Factors That Determine Our Credit Score?
Aug 2, 2009 Credit
Having a good credit score is of the utmost importance as it helps us to avail loans or mortgages at lesser rates of interest, and as such if we know the factors that influence our credit rating, then we can work on them to build a good score.
A credit score is usually rated from 300-850 points, with 300 being associated with a person having the greatest credit risk and 850 denoting the least credit risk. There is a formula which the Fair Isaac Corporation, (FICO) uses to calculate score. According, to this formula, 35% of our score is determined by the regular payment of our bills. If we keep paying the minimum balance for our credit card on time, then we can hope to have a good credit score.
30% of the score is determined by the difference between our total credit limit and the amount we still owe .Thus, we should the minimum possible amount from the credit available to us. 15% of the credit score is made up by the length of our credit history and as such we should always keep our credit cards updated and also not cancel them frequently.
The number and types of credit lines we have, new accounts and new applications for credit cards make up the rest of 20%. Thus, we should always take care to manage all the above mentioned factors properly and should try and maintain a very good credit score always. You never know when an emergency will pop up forcing you to take cash on credit.
Tags: Credit
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