Credit Scores
What's It All About?
Understanding how your three credit scores are calculated can help keep you aware of how your credit-related activities affect them. This model analyzes the habits of millions of consumers, specifically looking for similarities and trends. Statisticians then use this data to calculate the likelihood that individuals in similar situations will have the same outcome. For instance, they question: If one type of person defaults on a payment will someone just like them also default on a payment?
Your Credit Score Considers:
- The number and severity of your late payments
- The type, number and age of your accounts
- Your total debt
- Your recent credit report inquiries
Your Credit Score Does NOT Consider:
- Your age
- Your salary and employment details (although, a lender may consider this information separately)
- Where you live
- The interest rates on your other credit accounts
- Your child/family support and rental agreements
- Any credit inquiries made by yourself, prospective employers and prospective lenders seeking to make "pre-approved" credit offers
Good Financial Habits Can Improve Your Credit Rating
Although your credit scores, calculated by the three major credit bureaus, reflect your historical credit payment patterns, they give more weight to recent information. So while you can't change your past performance, there are steps you can take to make it better:
To Avoid Developing a Low Credit Score:
- Pay your bills on time
- Maintain low balances on your credit cards
- Don't open any more credit accounts than you need
- Pay off your debt; don't move it from account to account
- Don't close your unused accounts
