Understanding Your Credit Score

December 3, 2007 | Comments Off

The best chance you have of improving your credit score is understanding how it is calculated. Gaining a clear understanding will help you to decide on the actions you need to take to improve your score.

Your credit score is a numerical calculation based on a number of factors that helps lenders decide whether you are a risk to lend money to. The numbers generally range from 300 to 950 and allow lenders to see how good you are at paying your bills and taking care of your debts.

Several parameters in your credit file, including length of credit history, number of open accounts, loans, mortgages, public records, and others are formulated to produce a three-digit score. The higher your credit score is the more likely you are to get credit and a higher score usually results in lower interest rates as well. This is because higher scores are regarded as a lower risk for repayment.