FICO scores are an indicator of a person's credit history. These scores are used by creditors to evaluate income and debt. A good credit score will give you more options, and allow you to access lower interest rates. Your credit score could also be used by utility companies and landlords. If you don't have an excellent credit score, you may need it to improve it in order to apply for a loan and get a credit card.
Payment history
Credit scores are influenced by your payment record. It records when and how much you have paid off a debt. As time passes, any negative entries from your past will fade. The most recent FICO model also contains trended data over the past 24 month, which lenders can use to determine whether you are likely or not to pay your debt.
Your payment history is the history of all your payments. This gives lenders an overview of your repayment history. Missing a payment or sending one to collections can really damage your credit score. Lenders view you as a high risk borrower if your payments are not made on time.
Accounts owed
The number of accounts you have is one of the biggest factors that can affect your credit score. This category is responsible for about 30% of your overall score. It is directly affected when you open new credit cards accounts. This includes all accounts and balances. The higher the risk of you being overextended, the more accounts you have.
You can improve your credit score by paying off your debt. Credit scoring models look at many factors to determine a person's overall credit score, and the amount of debt is a major component of that. You don't have to be a high-risk borrower, but it will make it harder for you to meet your monthly obligations.
Credit history length
The length of your credit history is one of the most important factors that will determine your credit score. Your credit score takes into account the length of each account, as well as the age of each account. At least six months should be sufficient to establish a credit history. If you have opened a brand new account, your history is likely to be shorter.
FICO uses the average account age to determine your credit history. This number is calculated by adding up the ages of all accounts and dividing them by total accounts. The average age of credit accounts is around 8 years. In determining the length and duration of your credit history, you also need to consider the lengths of particular accounts as well as the time they have been open. FICO doesn't make these factors public.
New credit
FICO scores take into consideration recent activity. This includes credit applications and new accounts. Lenders also will consider when you last applied for a loan and can lower your score by a few point. Your score will depend on the type and amount of credit you apply to.
There are two options to improve your credit score. You can pay your bills on schedule and use available credit responsibly. The first step is to review your credit reports. It takes less than two days to get your credit reports. Setting up due-date notifications on your credit cards is another way to monitor your credit. Although it can take some time to set up these alerts, it is a great way to improve your credit score.
VantageScore
VantageScore is a credit score that was introduced in 2006. FICO and VantageScore are based on credit reports. However, the method of calculating the credit score differs. FICO, for instance, uses data from credit bureaus while VantageScore uses data on consumer behavior over a period of two years. It is therefore important that consumers understand the differences between VantageScore Score and FICO Scores and how they impact each other.
VantageScore has its advantages and disadvantages. It is easier to compare and understand. Equifax, Experian, Transunion created the VantageScore system in order to be consistent and easy to understand. It uses letters grades instead of numbers.