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What makes up your credit score?

A person's credit score is used by money lenders and financial institutions. Your credit score essentially determines how reliable the borrower will be. The credit score can be determined by checking the financial background of the person applying for loan or credit card. It is not difficult to check the credit history of anyone. The credit score is determined by examining the bill paying history, credit accounts, and outstanding debts.

Money lenders generally follow Fair Isaac and Co. (FICO) to determine the credit score of the borrower. FICO is the method of determining the likelihood that the credit user will pay his or her bills. This method has proven to be a reliable method for money lenders to determine your credit history. Using mathematical tables and programs this system assigns points on the basis of information provided which determines the future credit performance of the borrower

Here are the factors that are analyzed:

• Payments: The method checks if the payments made by the borrower in the past have been made on time or have been late.
• Residence: Frequent change of residence can create a doubt for financial lenders. Several years of stay at the same place reflects as a positive point towards your credit score.
• Employment: The history of employment plays a role in determining the credit score as well.
• Credit Information: Bankruptcies, charge offs, etc. are viewed negatively in terms of a credit report.

There are three FICO scores calculated by the data provided by all the three bureaus - Experian, Trans Union and Equifax. Many money lenders use all the three scores while others prefer to use only the middle score.

It is important for everyone to have a good credit history and efforts should be made towards achieving a good credit score. Here are some tips that can help in making up your credit scores:

• Payment of Bills: Always pay your bills on time as late payments and collections have a negative impact on your credit score.
• Reducing your credit card balances is important. Maxed out credit cards have a negative impact.
• Apply for credit only when needed. Too many credit inquiries are not considered good for the credit score.

Increasing your credit score is never accomplished quickly. You'll need time and intelligent financial planning to increase your credit score. But getting and keeping a good credit score will be ben eficial when it comes time to apply for a large loan.

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