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[G203]Get Your Free Credit Score

by Felicity Walker, Fel

If you want to borrow money from a lender, you'll quickly learn how important your credit score is. Lending institutions will almost certainly take a look at it, and may well approve or decline your loan based on what they find. A bad credit score can also mean you'll only be offered loans with interest rates significantly higher than standard rates.

Basically, a credit score is a number calculated by analysing the details of your credit history. Whenever you do anything that involves credit, it's recorded. The lender takes all of your credit history, enters it into a computer, and the computer then calculates your credit score. Various credit-ranking agencies use different software, so it's quite possible that you'll get a different credit score with each one. However they'll all still fall within a similar range.

Sometimes, credit scores go by the name of FICO scores. Fair Isaac Corporation (FICO) developed the software most commonly used to determine credit scores, and that's where the name comes from.

Your credit score is compiled from a number of different parts of your credit history, and each one contributes to a different degree. Each factor is assigned a different percentage in the calculation of your credit score. Some of these factors include amounts owed, payment history, and the types of credit you currently have. So let's take a look at the various factors in more depth, and what percentage of your credit score they will generally represent.

Payment History

Payment history includes your history of amounts paid and when, and particularly late payments. Obviously lenders like to see no late payments, as someone with a history of late payments is going to be a much bigger risk for them. Payment history accounts for 35% of your credit score.

Amounts Owing

30% of your score is based on any loans or outstanding debt that you currently have. The lender will look to see how many accounts you owe money to, and the total balance of all your amounts owing. They're also keen to see that you don't have access to much more debt, in terms of lines of credit or credit cards, in case you have the opportunity to overextend yourself.

Length of History

Obviously, if you have a good credit history stretching back for a number of years, that's going to work in your favour. Lenders will look to see how long various accounts have been open, and whether there's been any activity in those accounts. History accounts for 15% of your credit score.

Types of Credit

10% of your FICO score is allocated to analysis of the number and types of accounts you have. Lenders tend to prefer diversity, so they'd rather see a variety of account types, not just credit card accounts.

New Credit

Another 10% of your credit score is based on recent activity in your credit history. Lenders get nervous when they see a lot of recent history, particularly if the credit that was applied for has been knocked back. This tends to send warning signals that you're in trouble, or may have the opportunity of overextending yourself. Never apply for a loan with more than one lender at a time - a batch of 10 applications all hitting your credit report around the same time will make it almost impossible for you to get an approval.

Now that you understand the factors that make up your credit score, you might be wondering what sort of number is considered a good credit score. Mostly, credit scores fall between 350 and 850. The higher your score is, the better your credit. Lenders like to see high scores, because that suggests that you're a low risk borrower. A lender will feel comfortable that they're a lot more likely to get their money back from someone with a high FICO score, because these people have a good, solid history of paying their debts on time and generally demonstrating good money management skills. So a high credit score means you're low risk, and have a much great chance of your loan application being approved.

But if your credit score isn't that high, what can you do to improve it? It doesn't happen overnight, that's for sure, but the sooner you start practising good money management skills, the sooner you will see your credit score rise. Always pay bills on time, and as far as possible keep your credit card balances low. Don't open lots of new accounts in a short space of time just before applying for credit.

It's also worth checking the information on your credit history to make sure it's accurate and up to date. If you find anything that's incorrect, apply to have it altered or removed. Even a few small changes may be enough to get you over the line with your next loan application.

None of this is rocket science - obviously lenders want to limit their risk, and your credit score says a lot about you and your money management skills. Remember, it's not just a question of how much debt you currently have - lenders are looking for longer-term history showing up to date payments and generally good financial management.

So even if you don't have plans to apply for credit in the immediate future, make the effort to keep your credit history as good as you can, because it will pay off in the future.

If you ever find yourself in debt, don't be quick to judge that using a credit repair service is the best of ideas. Take your time and surf the web in search of solutions. You'll probably be surprised at how many people support the idea of self help when it comes to one's . All it takes is time, determination and setting up a plan that will aid you in paying all of your debts. If you manage to do that, then your financial situation will be improved before you know.

There is much to say about credit scores, but unfortunately there is a lack of information about how to protect your financial well being and scores. Your score is the single most important factor that creditors take into consideration when it comes to any type of loan or money lending. The score is calculated according to several factors, being particularly useful for determining the interest rate. It goes without saying that having a high credit score equals a lower interest rate. On the other hand, if you have defaulted on loan payments, have credit card debt or other financial problems, you can be certain that your score credit score is low. You can expect an interest rate that hits sky limits.

What is the best thing you can do to make sure your score remains at a normal level? First of all, pay your bills on time. An impressive percentage of your score is calculated based on your track record of paying bills on time. Also, pay more than the required minimum payment. Most credit card debt is accumulated due to excessive spending, often leading to exceeding the set credit limit. Word of advice: stay within your limit! You do not want the balance on your credit card to be inclined to the debt part, affecting your credit score even more.

Your financial history also influences the number that so greatly affects you financially. For example, did you know that 15% of the score is calculated according to how long you've had an open account? Lenders find someone with a long history to be solid from a financial point of view and thus, they are more confident in lending to you. Don't open new accounts just because they have some advantageous offers. And yes, don't mix credit cards with several loans, transforming it all into one big pile of debt. Doing these things can only negatively affect you and your score.

We've mentioned credit scores, now is the time to tell you some of the best ways to manage your debt, thus beginning your credit score repair. You don't have to waste your time looking for a company specialized in . Do it on your own! Start by creating a budget. Take a good look at how much money you earn every month, then compare this sum to your monthly expenses. Try to reduce the amount reserved for leisure and put a little bit aside every month in order to reduce some of the existing debts.

It is highly important that you request a copy of your credit score. This report can be obtained from any of the three main credit agencies and you should know that you are entitled to one free copy per year. What should you look for? Well, you need to be certain that all the information presented in your report is accurate. If your score seems low, try to identify when or if you missed payments or were late, plus the dates when you exceeded your credit limits.

Talk with your lenders. No one is trying to bury you even deeper in debt. On the contrary, lending institutions are more than happy to set up repayment plans for their clients, even if that means smaller payments each month. If you demonstrate a willingness to pay your debts and set things straight, they will definitely provide you with the help you need. You can also try and negotiate. You can obtain a better interest rate or even lower payments. If your lender agrees to a lower rate, payments, or other compromise, make sure to get this arrangement in writing. Stop charging your credit cards, pay at least the minimum amount owed each month, or the agreed upon amount, and don't be late on your payments and it will all work out just fine!

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Both Felicity Walker & Megan M are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Felicity Walker has sinced written about articles on various topics from Finances, Computers and The Internet and Finances. . Felicity Walker's top article generates over 22200 views. to your Favourites.

Megan M has sinced written about articles on various topics from Debts Loans, Finances and Business and Finance. Author, Willie Tomlin, has 33 years experience as a researcher in financial matters. Mr. Tomlin has acquired vast knowledge over the years in regards to. Megan M's top article generates over 9900 views. to your Favourites.