What is a Credit Score?

A credit score is a rating used by a lender to help determine whether you qualify for a mortgage loan. Based on information in your credit file, the credit reporting company analyzes your information using a complex mathematical model to yield your credit score. Below is you rate according to your score.

FICO Score Avg Rates
760- 850 6.531%
700- 759 6.753%
680- 699 6.930%
660- 679 7.144%
640- 659 7.574%
620- 639 8.120%
600- 619 8.182%
580- 599 8.647%
550- 579 9.149%
500- 549 9.558%

Most credit scores estimate the risk a company incurs by lending you money specifically, the likelihood that you’ll fail to make payments in the next two to three years. The higher the score, the less risk you represent. Your score is calculated by a mathematical equation that evaluates many types of information found in the credit file.

What Factors Affect a Score?

Many different formulas are used to calculate credit scores, but most are based on the following factors, which each scoring model weighs differently:

Payment history. A record of late payments on your current and past credit accounts will lower your score.

Public records. Matters of public record such as bankruptcies, judgments, and collection items may lower your score.

Amount owed. Owing too much will lower your score, especially if you’re approaching your total credit limit.

Length of credit history. In general, a longer credit history is better.

New accounts. Opening multiple new accounts in a short period of time may lower your score.

Inquiries. Whenever someone else gets your credit report — a lender, landlord, or insurer, for example — an inquiry is recorded on your credit report. A large number of recent inquiries may lower your score.

Accounts in use. The presence of too many open accounts can lower your score, whether you’re using the accounts or not.

Manage Your Credit Score
Looking for a higher credit score? There’s good reason to do so — a higher score can give you a greater array of financial options and more favorable credit offers. Even if you already have a good score, there’s always room for improvement by carefully managing your credit. Keep in mind, however, that your credit score is based on your history of borrowing and repaying money, so there’s no way to instantly change it. But here are some effective strategies that should help to strengthen your credit score over time.

Top 10 Ways to Manage Your Score

10. Learn what your current FICO� credit score is and what appears on your credit report.

9. Don’t open new credit cards that you don’t need just to increase your available credit. This approach could backfire and actually lower your score.

8. Try to keep your total account balances as low as possible. High outstanding debt may negatively affect your score, as you have a greater chance of missing payments.

7. Correct any incorrect information that might appear on your credit report. Visit Fixing Errors on Your Report for more information.

6. If your credit is severely damaged, or you have a very short credit history, there are still ways to improve your credit over time. Consider opening new accounts responsibly and paying them off on time.

5. If you fall behind on paying a bill because of illness, unemployment, or family issues, write a short explanation to the credit reporting agencies. They will add it to your credit report. Also, call your creditor to explain the circumstances and, if possible, work out a payment schedule you can meet.

4. If you need help managing your credit, contact a reliable nonprofit agency, such as:
Consumer Credit Counseling Service (CCCS)

3. To minimize the number of inquiries on your credit report, don’t apply for multiple credit cards over a short period of time, or for a card you’re not likely to get. Apply for new credit accounts only as needed.

2. Make all of your payments on time. If forced to miss a payment, be sure to pay the following month. Accounts more that are past due will be indicated on your credit report. If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your score.

And the number one way…?

1. Continue to check your credit report regularly, charting your progress along the way.