Your credit score is probably one of the most important, yet overlooked numbers in your life. This figure can either save you tons money or cost you just as much. Your FICO credit score can prevent you from getting a job, it can stop you from being able to purchase a home and it can interfere with your ability to get insurance. It pays to understand what a credit score is, what affects a credit score, and what you can do to improve your score today.
What is a credit score?
Your credit score is a rating based on a level analysis of your personal credit files. FICO credit scores, compiled by the rating company FICO, can range from 300 to 850 and rate your "creditworthiness," the likelihood that you will pay your bills or not. The three major credit rating agencies utilize the FICO score rating model. The median credit score in America is 711. Those with credit scores below 660 are deemed to have poor credit and typically have trouble when it comes to applying for loans, financing a new home or purchasing a car.
Whenever you make a payment towards a bill or loan, the issuing company keeps track of how often you pay, as well as how much you pay each time a payment is due. It is those companies that then report your credit history, loan history as well as your payment history to credit reporting companies who ultimately decide your credit score.
What affects my credit score?
Many different factors contribute to the calculation of your FJICO credit score. Your payment history when it comes to loans and credit cards is one of the biggest factors. Other factors include your credit history, the amount of credit cards you have, the number of credit card applications you have outstanding, as well as the types of credit you have.
How can I improve my credit score?
Here are some helpful tips for improving your credit score:
- Keep a small balance on credit cards, and make regular, timely payments.
- Minimize the number of total credit cards you own.
- Avoid over-checking your credit score. Your score can decrease for numerous credit score reports, so only check your score once a year.
- Don't apply for multiple credit cards at one time.
- Try to avoid only making minimum payments on your credit cards unless you have no other options.
- Credit reports are known to have errors, so when you get your annual credit report, be sure to check it for any mistakes and alert the credit bureau of these mistakes as soon as possible.
- Don't apply for credit you do not need.
