Credit Scores

3 Minutes Read

A credit score is a three digit number that is generated by a mathematical algorithm using the information in your credit report. This is designed to predict the risk, the likelihood that you will become seriously felonious on your credit obligations. Your credit score can mean the difference between being denied or approved for credit and whether you will be offered a low or high interest. If you do not have a good credit score, it means you cannot qualify for apartment rentals but a good score can help you get utilities connected without a deposit and even help you qualify for an apartment rental.

There are so many models of credit score that are in existence with the most common one in the market being the FICO credit score. Most financial institutions use this score in their decision making process. If you have a higher number of FICO score, it means lower risk while a lower number means higher risk. One question that many ask themselves is that what is a good score to attain and what credit goes in to a credit score? Data from ones credit report is the one that goes in to five major categories making up the FICO score. There are some factors that the scoring model weighs that are heavier. These are the payment history and the deb owed.

The elements of a credit score are the payment history, amounts owed, length of credit history, new credit and type of credit used. In the payment history , what is checked for is your account payment information that includes law-breaking and the public records. Amount owed is how much you owe on your account. What is weighed is the amount of credit available that you are using on revolving accounts. This is heavily weighed. Length of credit history is how long you opened your accounts and the time it has been active. Type of credit used is the mix of accounts that you posses such as revolving and installment. New credit is ones quest for new credit. This includes the number of recently opened accounts and credit inquiries. This is a breakdown of what makes up a credit score. What you should note is that personal or demographic information such as race, address, age, your marital status or income does not affect the score in any way.