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A long time ago I found out the hard way that my FICO Credit Score could make my financial happiness or break it. It's the one credit number that lenders judge us by so I thought I would show you how that number is arrived at. This is not common knowledge so read on... If you suffer from a FICO credit score of less than 660, you definitely need to develop an action plan to fix it. But, before developing your action plan, you must first know how your credit score is computed. Here are the 5 key areas that make up your score: 1) More than a third of your FICO credit score is made up of your credit history. Your history gives lenders a snapshot of whether you have been a good credit risk in the past. Your past behavior is considered an accurate guide of how you will manage debt in the future. Your FICO credit score applies mathematical formulae to things such as late payment, loan charge-offs, unpaid federal-state-local taxes, bankruptcy, and poor handling of other financial obligations. If you have performed poorly in any of these areas, the computation adds up to negatively impact your FICO credit score. While you can't change the past, you can change the future by starting good credit practices right now. You know what that means, right? Pay your current bills on time! 2) Another third of your FICO rating is based on the amount of your current debt load. If you are mired in debt, even though you may be paying your bills, your debt load could make you look like you are living paycheck-to-paycheck and would be unable to take on any more debt. Lenders look at income-to-debt ratio's to determine if you will be able to pay money back should you get hit with an unexpected financial setback. Lenders allow a margin for disaster to keep their money safe. Your score will suffer even more if you have borrowed a lot of money or racked up a lot of credit card debt recently. Such activity is a red flag and will impact your FICO credit scoring. If you have available cash, you can off set this by paying down some of those debts as fast as you can. 3) About fifteen percent of the FICO computation is based upon how long you have had credit. The longer the better will have a positive influence on the scoring calculations. Lenders can only judge you by your history and the FICO score that represents your history. If you have not handled credit for very long, you may not have enough of a track record to prove to lenders that you will be a good credit risk. And, not having handled credit for a long time can knock some points off your credit score. You can counter this by not closing out older accounts that you intend to pay off. Leave them open. Your older accounts show your ability to handle credit. 4) About ten percent of your FICO scoring is based on the types of accounts in your history. These are things like charge cards, mortgage loans, personal loans, auto loans, etc. Lenders like to see a mix of financial obligations that you handled well. Making bills for everyday needs that you pay on time, as well as one or two different types of loans, can actually improve your FICO credit score. And, having at least one credit card that you manage well can also help your credit score. The balance of the computation, 15% of your score, is a combination of how you handle your credit overall. This includes how prompt you are when paying your bills. In other words, waiting to pay to the last possible moment can affect your score negatively. I can tell you from personal experience that it is possible to estimate how much a specific area of your credit report affects your credit score so you can take action. Our score is consistently between 810 and 830 simply because we applied the tips in this article. You should, too! It takes knowledge about credit tactics to quickly fix your credit history and raise your FICO credit range score to 750 and higher. Jim DeSantis will show you how to do it yourself right now! Go here ==> Raise FICO Credit Score! or here ==> Fix Your Credit Report!
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