The FICO was introduced in 1989 by Minneapolis Fair Isaac Corporation. The credit score assigns numerical values to data in your credit report and can be from 350 up to 850. The higher your credit score is - the better chances to get the best credit cards you have.
Your credit score is constantly upgraded every time you pay your bills or open new accounts. Your credit score may vary in different credit agencies as information may be reported with some delay.
If you know how your credit score is formed, it will be easier for you to improve it, so there are 5 the most important components of your credit score:
1.You credit history. Your previous financial behavior can really predict your future behavior, that's why it is the main component that builds your credit score. If you have always paid your bills on time and have not missed them, creditors will trust you and will think that you will continue being a responsible borrower.
If you didn't pay your bills on time or missed them in the past, it will influence your credit score negatively and you will not be trusted by potential creditors.
2.Your debt also plays a great role in forming your credit score.
If you already have a big amount of debt, that gives a sign to the creditors, that you have troubles paying back. Your outstanding balance and all the types of accounts the money is owned on are also taken into consideration. The credit card debt is weighted more heavily as people who have it, have greater repayment risk.
3.The length of your credit history is also very important component of your credit score. Long credit history provides more information about your future financial behavior, so the longer your accounts have been active, the better. So it is a good idea to maintain longstanding accounts.
4.If you often require new lines of credit, you will also damage your credit score. The potential creditors will think that you have a lack of cash, so you will probably have difficulties paying back in the future.
5.If you use different types of credit like a car loan, few credit cards and a mortgage, you don't present risk to lenders. There is no exact formula, but some types of credit are less favorable that others. For example, major credit cards like Discover, Visa, MasterCard or American Express are looked upon more favorably than credit cards that are issued by small retailers and department stores.
Now that you know what your credit score consist of, it will be easier for you to rise therefore; you will get only best credit card offers and will be able to enjoy the benefits of these cards!
