Everyone knows that having a “good” credit score is important. But what is a “good” credit score? What type of information determines that magic number, which can have a huge impact on one’s life?
A credit score is nothing but a number computed from a statistical analysis to determine the creditworthiness of an individual. Here in the US, we mainly rely on the FICO (Fair Isaac Corporation) model to calculate credit scores. Such scores range from 300 to 850, with an average score being around 680. A good credit score is one that is above 650. Any score lower than 620 will cause individuals to have a harder time finding financing and/or a higher cost of financing.
FICO scores are made up of various data, which fall within the following areas:
Payment history – about 35% of a FICO score
Outstanding balances – about 30% of a FICO score
Length of credit history – about 15% of a FICO score
Type of credit – about 10% of a FICO score
New credit – about 10% of a FICO score
As new information becomes available by creditors, credit scores will change so your score can improve over time if you begin to manage your credit responsibly. Paying bills on time, keeping balances low, checking your credit report regularly, and limiting the number of open credit accounts are just a few tips to raise scores. Having good credit scores makes your financial dealings a lot easier and can save you money in lower interest rates.
http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx
http://creditcards.lovetoknow.com/What_is_a_Good_Credit_Score
http://www.pueblo.gsa.gov/cic_text/money/creditscores/your.htm
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