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Myths and Truth about Credit Scoring
Credit score is the key factor determining approval of almost any type of credit. It is based on the information contained in your credit report files. The widely used FICO score was developed by Fair Isaac Corporation, and it is a formula which assesses your potential credit risk. The information used to calculate credit score can be broken down into five major parts. Your payment history with banks and other lenders will account for 35% of the score, the amount of money you owe for 30%, and the length of your credit history for 15%. New credit and a statistical assessment of how healthy your credit mix is will both account for 10%. Credit score is not based in any way on the following information: - references to debt management or credit counseling programs. You can increase your score by: - always paying bills on time. Banks decisions are made according to their own standards. While the majority of lenders use credit score as a key factor in approving credit, other facts play their parts as well, among them: your income, employment status and length of time at present address, to name a few. Each bank has its own standards. What score is acceptable for a particular loan or credit product depends solely on a lender. The person's credit score might not be high enough to get credit with one bank, and perfectly acceptable with another. More about credit score and tips on improving your credit can be found at: How Much? - Comparing financial products. Senior staff member for How Much?
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