A credit score represents your current risk level for loans. It is calculated based upon a variety of factors including your credit history, repayment patterns, and credit mix. Credit scores vary from bureau to bureau, but the main elements are the same.
Credit history is a key aspect of credit scores. Your credit history includes the date you opened your first account, the length of those accounts and the date you closed them. A long credit history can help lenders make an informed decision about how likely you will be to repay your loans.
Another factor is the amount of debt you carry. The credit bureaus use different algorithms to calculate your credit score. Each one varies, but the FICO score - which was developed by Fair Isaac Corporation - takes into consideration three types of debt. If you have an installment loan, a mortgage, or a car-loan, your debt can be included in credit scores.
Your age, your present salary and the number of credit inquiry you have made are all important factors. Although there is no single formula to calculate credit scores, some factors are more important than others.
To generate your own credit score, you might want to consider working with a third-party agency. These companies may use their own scoring systems, which can be more accurate. They often fall in a similar range to FICO's.
The most important factor in calculating your credit score is your healthy credit history. This information is used by lenders and insurers to determine your ability to repay your loans. It's important to remember that your score could change as a result of the passage time. Paying your bills on a timely basis will help you improve your financial management skills.
While you may find sites that claim they only have one credit score available, this is not the case. Different credit bureaus use different calculations, just like the lenders and insurance companies that use them.
You might notice that your score is higher than the score of someone with the same amount of debt, but a lower score. This could be due in part to the fact your credit score is more likely than someone with a lower total debt. A large balance might cause your credit score to be lower. You might have a higher score if you've recently paid off your debt or if there is an older loan or credit card.
You should also keep in mind that certain items on your credit reports will be more important than others over time. Public records, like foreclosures or bankruptcy, will count as part of your credit record, but won't directly affect your score. However, the higher your score, the more negative credit information you have.