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Credit Rating Score

You credit rating is represented simply by a credit score. A a good score can make a difference with lower interest rates.

What is a credit score?

A credit score is what lenders use to determine whether or not they want to lend you money. It is based on your previous credit history, and then it is compared to the statistics of millions of other borrowers. The higher your score the more likely they think you are to repay the loan. Paying late or going over your credit limit will lower your score. However, paying on time will help increase your score.

What factors are considered in your score?

A few examples of things which will affect your credit score

Positive Factors:

  • Paying on time
  • Long term Accounts
  • Low debt to income ratio
  • Not too much unused. available credit
  • Not too many cards or revolving credit
  • Good job history

Negative Factors

  • Too many or too few revolving lines of credit
  • Late payments, missed payments
  • Too high debt to income ratio, too many accounts.
  • Number and type of recent inquiries
  • No history reported
  • Defaults, delinquencies, legal action or liens
  • Unstable job or residential history

These items do not carry the same weight as each other in determining you credit score. Minor credit cards carry less weight than major ones or mortgages.

However, the single most important issue is PAYING YOUR DEBTS ON TIME. If this is the only thing you do you can maintain or improve your credit rating.

FICO Score

The Fair Isaac and Company has the model used most often by lenders when determining your credit score. This is called the FICO score and it uses the positive and negative factors listed above to determine a credit score.

See How Lenders See Your FICO Score To check your credit score, click here.

 


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