How to Raise Your Credit Score

What is my credit score? This question is one of the most frequent questions asked by people with credit scores. It is also one of the most important questions to understand. Understanding your credit score, its purpose and what it can and cannot tell you will help you make decisions about your own financial future.

A credit score, also known as a credit profile, is simply a numerical expression calculated based on an assessment of an individual’s available credit files. A credit score, sometimes called a FICO score, is primarily an estimation based on information usually sourced from credit bureaus such as Experian, Equifax or Trans Union. These agencies collect and regularly update information on consumers’ credit histories for the purpose of gauging the risk an applicant poses to lenders in terms of repayment ability. Credit scores are available from a number of sources and they include the major credit bureau reporting companies (Equifax, Experian, and TransUnion), consumer reporting companies (Equifax, Experian and TransUnion) and, most importantly, the three major credit bureau banks – Experian, Equifax and TransUnion.

Your FICO score is determined through a complex mathematical equation. The equation factors in your payment history, the amount of available credit you’ve used and the types of credit accounts you have open. Your available credit accounts may include loans, mortgages, auto loans, credit cards and store cards. Based on the factors described in your equation, your FICO score is calculated.

To improve your FICO score, pay off any existing debts you have and make sure any other outstanding loans, credit cards or store cards are paid in full or nearly full each month. If you have bad credit, you’ll want to avoid opening new credit cards and loans and closing old accounts. This will only hurt your credit score. Also, if you are planning to buy a house or invest in some sort of long-term property, you’ll want to think long and hard about the type of mortgage or loan you’ll take out, the term of the loan and how much you plan to borrow before you actually pull the money out of the bank. A good credit score indicates that you are a responsible borrower.

In order to get into the good credit score range, you’ll need to spend some time shopping around for different lenders. Make sure the lender is reputable and has a good reputation for lending money. Lenders are very interested in getting their money back and having a history of following through on payments. They also want to know that you can pay back the loan. You’ll find that interest rates vary widely from lender to lender, so shop around and compare interest rates before you decide to apply with a particular lender.

The formula used to determine your FICO score involves a little math, so it’s not surprising that many people aren’t comfortable with it. Luckily, there are services available to help you understand the formula and then use it to improve your credit report and score. These services, like Credit Karma, will give you an exact FICO score based upon information from your credit reports. It’s a free service and it can literally change the way you view your score in no time at all.

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