What is a Good Credit Score?

Credit scores range anywhere from 300 to 850. The formula, created by Fair Isaac, is used to calculate your credit score. Here is how it’s determined:

• 35% of it is based on your payment history. The score is affected by how many times your bills have been paid lately and how many times you have had bankruptcies in the past. When collections and bankruptcies happen also play a role, the more recent, the worse it will be more your overall score.

• 30% of this score is based on your outstanding debt. This part includes the amount you owe on your car, home or loans as well as the number of credit cards you have and their credit limits. The main rule here is to keep your card balances at 25% or even less of their limits.

• 15% of the credit score is based on the length of time you have had such credit. The longer you had good established credit, the better it is for you overall credit score.

• 10% of the score is based on the amount of inquires on your report. For example, if you currently have a lot of credit cards or loans, you will have a lot of inquires on your credit report. These inquires are generally bad for you since it means that you are in some financial trouble and thus need the funds to get out of debt. Moreover, the more recent those inquires are, the worse effect it has on your credit score.

• 10% of the credit score is based on any other types of credit you have now. These are the number of loans you have and the number of credit requests.