A credit score is a numerical indicator of your risk when applying for loans. It is based upon several factors, such as your repayment history and patterns, along with credit card mix. Although credit scores will vary from one bureau and another, the key elements remain the same.
A credit score's most important component is its length. Your history includes the date on which you opened your first accounts, how long those accounts have been open and the dates on which you closed those accounts. Credit history is a better indicator of your ability to repay loans.
Another factor is how much debt you have. The credit bureaus use different algorithms to calculate your credit score. Each one varies, but the FICO score - which was developed by Fair Isaac Corporation - takes into consideration three types of debt. If you have a mortgage or a car loan, your debt will be added to your credit score.
Consider your age, your present income, and the number you have made inquiries on your credit reports. There is no fixed formula for calculating a credit score, but some of these factors are considered to be more important than others.
Finally, you might consider using a third company to generate your credit score. They may also have their own proprietary scoring system which is better. They often fall in a similar range to FICO's.
Your credit history is the most important thing in calculating credit scores. In order to evaluate your chances of repaying your loans, lenders and insurers will use this information. It's important to remember that your score could change as a result of the passage time. You can improve your score by managing your finances and paying your bills on time.
You can find numerous sites that claim only one credit score. However, it is false. Different credit bureaus, lenders, and insurers use different calculations.
You might notice that your score is higher than the score of someone with the same amount of debt, but a lower score. This could be due in part to the fact your credit score is more likely than someone with a lower total debt. You might also have a low credit score due to a high outstanding balance. However, your score may be much higher if you have paid off debts recently, or have an older credit card or loan.
Noting that certain items may be less important over time is important as well. Public records, such as foreclosures and bankruptcy, are counted as part of your credit history, but will not directly affect your score. Your score will decrease if there are more negative items on credit reports.