What is a Credit Score?

What makes up a credit score?

1. Payment History 35%​
2. Amounts owed 30%
3. Length of credit history 15%
4. New credit 10%
5. Types of credit used 10%

​A credit score is a number based on the information contained in your credit report. There are multiple credit reporting agencies and many have their own scoring system based on secret formulas. The mostly widely used system is called the "FICO" score as developed by the Fair Issac Corporation, a for profit company. Lending institutions use this score to measure the risk involved with giving you a loan. FICO scores range from 300 to 850, with the higher number being best. It is important to regular monitor and fix credit report errors as soon as possible by disputing an innaccuate information contained on your credit profile.

What is a good credit score?

A good credit score goal is often considered to be 720 or higher. Your credit score is not a static number nor does it automatically disqualify you from obtaining a loan. Each time you make a timely payment your score may tick up. On the flip side each time you miss a payment, make only the minimum payment, or simply even apply for new credit your score may tick down. Good credit is important even if you do not want or need or want credit. Credit scores impact car insurance rates, homeowner insurance rates, and many employers consider credit scores when reviewing job applications. In the end, those seeking to borrow money should expect to pay higher interest or even experience outright denial with a credit score considered high risk as defined by the particular lending institution.