Your credit score will probably range from 300 to 850

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how well you are likely to manage it in the future. Your credit score will probably range from 300 to 850. The higher your credit score the better, although a score of 720 and over is considered a very good score. A low credit score, like a credit history full of negative information, can have many negative effects on your life. It may cause: You to be denied credit, insurance, or employment. • The terms of your existing credit accounts may be changed. For example, your credit limits may be low- ered, your interest rates may be increased, and so on. The cost of your insurance premium may go up. Fair, Isaac, Inc. is the main provider of credit scores to financial institutions and other creditors. Its score is re- ferred to as the FICO score, a term that has become virtu- 174
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ally synonymous with credit scores. However, some com- panies generate their own credit scores. For example, the Equifax credit score is known as BEACON; Experian’s is called the Experian/Fair Isaac Risk score; and TransUnion’s credit score is called EMPIRICA. Fair, Isaac helped each of the three national credit-reporting agencies develop their credit scores. Your credit score is derived by applying a mathemati- cal formula to your credit record information. Other infor- mation may also be taken into account including your income, employment history, whether or not you own your home, and so on. Also, different credit scoring formu- las may not give the same weight to your information, which means that your credit score will vary depending on who generates it. Your credit score will be harmed if you are close to your credit limit on any of your accounts. Here are the approximate weights that Fair Isaac will give to your information when it calculates your FICA score: Your account payment history 35% (Fair, Isaac will place the greatest emphasis on your most recent account payment history.) Your total amount of debt and the total amount of credit that is available to you 30% How long you have had credit 15% (Having had credit for a long time will help your credit score, especially if you have had credit with the same creditors for many years.) Warning Credit Reporting Agencies, Reports, and Scores 175
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Credit Hell Types of credit 10% (Having a healthy mix of different types of credit— installment loans, credit cards, a mortgage, etc. —will help your score. However, don’t go out and get new credit just to be more diversified.) Amount of new credit you are applying for 10% (Applying for a lot of credit within a relatively short period of time will hurt your credit score, especially if you have been late recently with your payments, are over your credit limit on some of your cards, or if any of your accounts have been sent to collections.) Transferring a balance from a long standing credit card to a new card and then closing the account that you transferred the balance from may harm your score because you will have low- ered the average age of your accounts.
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  • Spring '12
  • zinctolg
  • credit score, Credit history, Fair Credit Reporting Act, CREDIT REPORTING AGENCY, credit reporting agencies

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