Calculating Your Credit Score
Credit Scores are calculated using information from your credit report on the day in which it is calculated. Credit Scores are based on several factors such as:
1) Payment history - Information regarding how you paid your credit accounts in the past. This information includes late payments and bankruptcies.
2) Credit accounts - The number of credit accounts that you have open and the types of the credit accounts. For example, credit cards, mortgages, auto loans, etc.
3) Credit usage - The amount credit you have used compared to the amount of the credit line, or what credit is available.
4) Length of credit history - The length is the duration, or months, your credit accounts have been on your credit history.
5) Credit applications - The number of times you have recently applied for credit.
6) Bankruptcies - If a bankruptcy exists on your credit report and the age of the bankruptcy.
Many lenders use credit scores as a significant part of the loan process, which makes knowing the reasons that make your score higher or lower extremely important. Some lenders say knowing the reasons behind your particular score is more important than knowing your score itself, because the knowledge enables individuals to pro actively manage their credit, which helps to get better loans.
By improving the negative areas on your credit report and continuing positive credit actions, you will be able to improve your credit rating.
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