Understanding Your Credit Score

When you apply for credit one of the first things almost all credit officers do is check your credit score. Although not all of those officers explained to us what a credit score is, we are all rated according to it and the offers we receive were all dependent on that score. This is why understanding your credit score is of utmost importance, and for future reference at least basic knowledge should be acquired. In the following paragraphs we will tackle understanding your credit score, realizing what your credit score means and analyzing what you can do to improve it.

Credit score is actually computed as an average of several elements from your credit report. This report is typically broken into five different sections and each of these sheets will represent a piece of the final score. Each category of credit report information occupies a certain percentage in the final score. To begin with, it is essential to say that the highest percentage is taken by the category made up of credit and payment history. An issuer will look at all types of payments: credit card payments, retail accounts, installment loans and so on. He or she will particularly look at the number of delayed or not paid payments, time passed since the last skipped payment, number of problematic accounts as compared to accounts in good standing.

The next thing taken into account when computing the score is the total amount owed. These amounts are looked at in their absolute value and also in proportion to the credit limit. The number of accounts with balances is also relevant. The third thing issuers analyze is credit history, or how much credit you've had and for how long. Understanding your credit score is essential to you and you need to know that the length of all credit lines and their activity will be monitored and will matter significantly in the final credit score. Also, remember that all scores take into consideration recent credit activity. This category includes number of credit inquiries, new opened accounts, their amount, the time since they were opened and of course reestablishment of credit history if there were any issues in the past. Last, even if many people do not regard it as important the type-element is also significant - that means that the type of credit line you have (credit card, installment, mortgage) also plays a role (about 10% of the final score) in computing your credit score. You also need to understand that your credit financial report is the basis of computing your score. Each of the above mentioned elements is specific to every one of us, and as such if for some people amount owed is the major factor for others credit history is essential, therefore it is impossible to give exact percentages as to how much an element weighs in the final credit score.

Understanding your credit score, none the less, is not the only important aspect, managing it is also important. You will be able to improve your credit score if you follow a few simple tips. First of all, try to pay all the bills in time. This is more important than any of the other factors. If it's not possible to pay on time you can usually get away with paying the bill within a 30 day window of the due date. If you miss this date it is almost certain to end up on your credit report. Keep balances low on your credit cards and other revolving credit and try to pay off debt. Also avoid moving credit from one credit card to another. The low intro rates many companies offer for balance transfers can be very helpful, but it takes a toll on your credit score. It is also recommended that if you plan for applying for important credit soon, avoid opening too many other new accounts. When in doubt, hire a financial consultant. Most people may see this as an expensive luxury that they can't afford, but in reality financial consultant prices are fairly reasonable. Even a single visit can help you drastically improve your credit score, and if that results in a lower interest rate on a large loan it will more than pay for itself. A consultant will also be able to explain the credit score better.

All in all, what you need to know is that credit score influences depends on your credit report and it directly influences your credit payments and amounts. The higher the score the lower the interest rate and the payment will be. Taking into account the importance of this indicator, understanding your credit score will automatically mean you have more chances to improve and make it higher and therefore benefit from better loans.

This article has been provided courtesy of Creditor Web. Creditor Web offers great credit card articles available for reprint and other tools to help you search and compare credit card offers.

---

Credit Help For Renters And Others On The Horizon

Sue is a homeowner and pays her mortgage and other... Read More

What is a Credit Report?

Ever wondered what is a credit report? If you've ever... Read More

Credit Card Expenses Are Killing Your Budget!

Do you know the costs associated with your credit card?... Read More

How to Dispute Credit Report Errors

Your credit report--a type of consumer report--contains information about where... Read More

Warning: Free Credit Report Imposter Websites Springing Up on the Web

A recent amendment to the federal Fair Credit Reporting Act... Read More

Credit Repair Services vs. Do-It-Yourself Credit Repair

Millions of Americans suffer because of bad credit these days,... Read More

It Is In Your Best Interest To Do The Math On Your Credit Card Interest

If you begin foaming at the mouth once a month... Read More

Choosing a Credit Counseling Company

If you have considered credit counseling as an option to... Read More

What You Didnt Know About Your Credit Card Numbers

Have you ever really looked at your credit card and... Read More

Your Credit Score

Credit scores: all lenders use credit scores to determine interest... Read More

Teaching Students To Keep Out Of Credit Card Debt - The Parents Role

Parents have the full responsibility for their children and their... Read More

Will Inquiries Lower Your Credit Score?

What are inquiries?When you apply for credit the creditor or... Read More

How Your Credit Rating Affects You, and How to Check It

You might not know it, but every time you take... Read More

Credit Repair Companies and Credit Counseling

Let's be crystal clear, right up front. Paying someone to... Read More

Why Credit Cards are a Bad Idea

Credit cards are just so convenient, aren't they? There's no... Read More

The Truth About Credit

What you might not know about credit.Some people don't know... Read More

Beginners Guide to Credit

I remember back when I was 18 and completely oblivious... Read More

Tackling Bad Credit

The first time I heard the term credit history was... Read More

Bankruptcy vs. Credit Counseling: What Should I Do?

Credit Counseling and bankruptcy are both ways to relieve the... Read More

10 Dirty Tricks Credit Card Companies Play

The credit card companies make billions each year in legitimate... Read More

How To Survive In A Plastic World, Qualifying For Credit Card

Let's face it, having credit is no longer a choice.... Read More

Finding the Right Credit Card

There are so many credit cards out there to choose... Read More

What is Credit Counselling?

Ever wondered what is Credit Counselling? There are occasions when... Read More

Sound Advice For First Time Credit Card Users

If you are just entering the world of credit cards,... Read More

Top 5 Reasons To Check Your Credit Report Regularly

#1 Make sure mistakes aren't hurting your credit.Reviewing your credit... Read More

Dealing With A Collection Agency

Step I - Selecting A Collection AgencySelecting a credit collection... Read More

Credit Card Disclosure Table ? Do You Understand It All?

In addition to the APR (annual percentage rate) and the... Read More

Can Credit Search Entries Affect Your Ability to get Approved for a New Loan in the UK?

About Search Entries:Every time a lender checks your credit history... Read More

Dont Fall for Credit Repair Scams

We've all seen the ads on television or in magazines,... Read More

Credit Cards For People With Bad Credit Scores

Sometimes life lands you in a situation that causes your... Read More

Do You Know The Top Five Credit Card Mistakes?

When you're dealing with credit cards, you're playing with fire.... Read More

Why Does FACTA Matter to Me?

FACTA stands for Fair and Accurate Credit Transaction Act. FACTA... Read More

First Major Regulatory and Legislative Victory of 2005 for Creditors and Consumers

Under the Fair Debt Collection Practices Act, collectors are not... Read More