Credit Report

It is surprising how few of us know what our credit score is, how it is calculated, or how we can improve it, especially considering how many aspects of our lives are affected by our credit scores.
The purpose of your credit score is to give any potential lenders (or indeed, anyone who is considering trusting you in a financial relationship) an idea of how trustworthy you are in financial terms. This system works reasonably well, and allows for an easy way of judging whether or not someone is a good credit risk.

The three main credit scoring companies – Equifax, Transunion, and Experian – each have their own scoring system, plus there are several other sources of credit scores, the most widely known one being FICO, which uses information from all three of the main credit reporting agencies. There are also several smaller companies that have their own scoring systems.

With this in mind, the first thing you must do when looking at your credit score is to determine where it came from. Once you have done that, you can look up that company’s scoring criteria, and get an accurate picture of how good (or bad) your credit score is. The FICO score uses a fixed set of components that together make your credit score, although the exact formula they use is not public knowledge. In general, however, they divide your financial information into sections: your payment history is worth 35% of your score, your total debt is worth 30%, the length of time you have had a credit history is worth 15%, the kinds of credit that you have used is worth 10%, and the final 10% is based on your recent history of credit searches. Your final score will be a number between 300 and 850, which is the classic FICO score, although there are many other scores that you could get, depending on what type of credit search is done on you.