Credit Score Guide

After filing for bankruptcy several years back, I had to figure out what I needed to do to improve my credit score and have been diligently working toward this end ever since. Now, while still not perfect, my credit score has been improving ever since because I took the steps to learn about what I needed to do to improve it. In this article, I provide some of the steps I’ve taken and some of what I learned in my research to improve my own credit score.

Your credit score determines the amount of interest you will pay for credit cards or other loans. This includes loans such as car financing and mortgages. There are also non-interest types of costs your credit score can have on your life, such as the cost of insurance; your ability to rent an apartment or secure utilities without having a co-signer; and in some cases it can affect whether you will be selected for a job. Increasing your score by just few points will make a big difference in your life overall, but mainly in the interest rate you will pay for a purchase, especially important for those big purchases. A High credit score generally equates to getting the best loan rates and terms for car financing, mortgages, credit cards, etc. You get the idea. However, a low credit score can have a negative effect even on some of the most basic necessities of life.

While how your credit score is calculated is not public knowledge as the exact formula has been kept a secret by Fair Isaac Corporation, there are some basic approximations to consider.

Here’s the basic breakdown:

1 - Paying your bills on time - about 35 percent of a credit score

2 - How much you owe - about 30 percent of your credit score

3 - Credit history - about 15 percent of your credit score

4 - New credit - about 10 percent of your credit score

5 - Types of credit - about 10 percent of your credit score

Here’s some information that can help you improve your credit score and in some cases help you identify whether or not you’ve been the target of identity theft: