How Your Credit Score Is Determined


Exactly how your credit score is determined (we’re talkin’ FICO here) is somewhat of a mystery on the order of “Why are we here?” or “What’s with cats and the Internet?”

This is unfortunate, since one’s credit score is uber-important to just about everything from buying a house to getting a job to signing up for a cellular plan. A bad or low credit score equates to loan denials or, at the very least, paying higher interest rates. Neither are much fun.

However, the peeps at FICO (the most popular score) do share info on their credit scoring model. Lucky for us, this is really all the information we need to properly manage our credit scores.

Not surprisingly, the two most important slices of the pie are your payment history and the amount you owe. Focus on these two items and you’ll be in pretty decent shape. Here’s how:

  • Pay on time. Respect the due date.
  • Get and stay current. If you’re behind on payments, catch up as quickly as you can and then keep up.
  • Keep credit account balances low. The more available credit you use, the lower your credit score.
  • Avoid credit card hopping. Moving debt around won’t improve your credit score (although a one time transfer to a low rate card can help you get out of debt faster – be sure to read the fine print).
  • Avoid opening new credit accounts. Increasing your available credit can damage your credit score.

Your credit score is a magical three-digit number between 300 – 850. It is derived from the information in your credit report, which you can obtain for free every 12 months. You have to pay to see your credit score (Doh!).

Ok, so I may not have told you exactly how your credit score is determined but, you now know what you can do to improve your credit score.

Man, I’m good! The Pulitzer folks are probalby dialing right now.



Flickr image courtesy of LendingMemo

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About the Author ()

Melvin is the Smart Green Pig. "Smart" as in intelligent. Some would say "Super Intelligent" or perhaps "Genius". But also "Smart" as in surly and sarcastic, so watch your Ps and Qs! By the way, Melvin gets paid (quite handsomely) by SECU, so even though he's completely unbiased, some might think otherwise. Just sayin' (disclosin').

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