Credit Score, Credit Report

Credit Score Meter or rather Monitor is working all the time. We are always cautious to maintain a good credit score by all means so that it can help us get good mortgage rates and enable us to buy a nice car or may be a home for family.

Your credit score is a three-digit number. Your credit report contains a history of how you've paid your bills, how much open credit you have, and anything else that would affect your creditworthiness. Your credit score boils down all of that information into a three-digit number. The system awards points based on information in the credit report, and the resulting score is compared to that of other consumers with similar profiles. With this information, lenders can predict how likely someone is to repay a loan and make payments on time. It's the credit score that makes it possible to get instant credit at places like electronics stores and department stores.

Fair Isaac is an independent company that came up with the scoring method and software used by banks and lenders, insurers and other businesses. Each of the three major credit bureaus (Experian, Equifax and TransUnion) worked with Fair Isaac in the early 1980's to come up with the scoring method.

Until recently, your credit score was not available to you. Now you can get your credit score at a number of Web sites, including the big three credit bureaus, and at Fair Isaac's Web site. You can also ask your lender for access to your score when you apply for a loan.

The credit score number itself can range from 300 to 900. The formula for exactly how the score is calculated is proprietary information and owned by Fair Isaac.

• 35 percent of the score is based on your payment history. It also considers how many bills have been paid late, how many were sent out for collection, any bankruptcies, etc. When these things happened also comes into play. The more recent, the worse it will be for your overall score.
• 30 percent of the score depends on outstanding debt. How much do you owe on any loans? The more cards you have at their limits, the lower your score will be.
• 15 percent of the score is from how long you've had established credit? More, but good information about your past payment history gives more accurate prediction.
• 10 percent of the score is based on number of inquires done on your credit report. If you need loans or credit cards in more amount, you are not observing a good financial condition. FICO score uses inquiries in the last year only.
• 10 percent of of the score is based on the types of credit you currently have. The number of loans and available credit from credit cards you have makes a difference.

Your credit score directly affects the rate of interest for your loan. Because, higher the credit score, your credit risk decreases.

Now, the most important part...
How To Improve Credit Score

• Review your credit report and correct any errors you find. Sometimes, it can give surprising results.
• No need to close all unused/old credit card accounts, because that only changes debt ration. Creditors will look at debt-to-credit limit ratio so it's not a bad idea to continue with those unused cards also so that it can balance to debt.
• More to it, creditors may be looking at age of our accounts, so older accounts can help us here.
• Reduce your balances on credit cards to 75% or less of your available credit.
• Most Important! Pay all bills on time.
• Try to avoid possible credit report inquiry.
• Try to avoid opening many credit card accounts in a hope that you can increase your available credit.

If you are refused a loan due to credit score/report, the report requester must have received the reasons in the report. You can try & get it to make things correct.

I will compile more resources in the context, and post it here.

Have a Nice Credit!!!