Credit Card Watch

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Your FICO score is a vital component of managing your finances. This is the number used by the credit bureaus to determine how good your credit is. The FICO scoring system can appear to be pretty complicated if you do not know how it works. On the other hand, if you know how your FICO score is calculated, you can easily find ways to keep a good score or repair a bad one. Understanding your FICO credit score is key to maintaining good credit and keeping yourself afloat.

The first part of knowing how the FICO scoring system works is to know what qualifies as a good credit score. The highest score you can receive is 850. The best range is between 720 and 850, with scores from 675 up to 719 still representing good credit. Scores below 675 may have trouble getting good terms on money borrowed, and below 620, it may be hard to get credit at all. A score of 300 is the bottom of the FICO score ladder.

Your FICO credit score is made up of a number of factors. Thirty-five percent of your credit score is based on how punctual you are with payments. Any payment over thirty days late can be reported to the credit bureaus and lower your score. Thirty percent of your score is also based on your total debt — the ratio of revolving debt, like credit card balances, to available revolving credit, such as your credit limit.

Another fifteen percent of your credit score is based on the length of your credit history from the time you first borrowed money to the present. Ten percent is based on the kinds of credit you use. Some kinds are weighted more heavily. The final ten percent of your FICO score is determined by how much credit you have used recently.

Some special factors that can influence your FICO score include money you owe due to a court judgment or tax lien. These can carry a very large credit score penalty. If you have more than a particular number of consumer finance credit accounts, you will also find that your score is impacted negatively. The number of credit checks made recently can also lower your score, although the credit bureaus do allow for a certain number of checks in a particular window of time, such as might occur when you are shopping for the best rate on a loan.

There are three major credit reporting agencies in the United States: Equifax, Experian, and TransUnion. They all record credit a little differently, meaning that it’s important to get a report from each to get an accurate picture of your credit. Any US resident has the right to request a copy of his or her report from each agency once a year. You can do this through through the Internet, via a toll free call, or by mailing an Annual Credit Report Request Form. This report does not contain your credit score. However, you can choose to purchase that score for a small fee at the time you access your report.

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