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"YOUR CREDIT RATING"

HOW YOUR CREDIT REPORT IS CALCULATED

The number can range from 300 to 900. The formula for exactly how the score is calculated is proprietary information and owned by Fair Isaac. This is an basic breakdown of how it is determined:

* 35% of the FICO score is based on your payment history. This makes sense since one of the primary reasons a lender wants to see the score is to find out if (and how timely) you pay your credit and bills. The score is affected by how many bills that have been paid late, how many that were sent out for collection, any bankruptcies, etc. When and why these things happened also comes into play. The more recent, the worse it will be for your overall credit score.

* 30% of the FICO score is based on outstanding debt. How much do you owe on car, credit cards or home loans? How many credit cards do you have that are at their limits? The more credit cards you have at their limits, the lower your score will be. The rule of thumb is to keep your credit card balances at 30% or less of their limits. (never more then 70%)

* 15% of the FICO score is based on the length of time you've had credit. The longer you've had established credit, the better it is for your overall credit score. Why? Because more information about your past payment history gives a more accurate prediction of your future actions. (don't get rid of your older credit cards)

* 10% of the FICO score is based on the number of inquiries on your report. If you've applied for a lot of credit cards or loans, you will have a lot of inquiries on your credit report. These are bad for your score because they indicate that you may be in some kind of financial trouble or may be taking on a lot of debt (even if you haven't used the cards or gotten the loans). The more recent these inquiries are, the worse for your credit score. FICO scores only count inquiries from the past year.

* 10% of the FICO score is based on the types of credit you currently have. The number of loans and available credit from credit cards you have makes a difference. There is no magic number or combination of types of credit accounts that you shouldn't have. These actually come more into play if there isn't as much other information on your credit report on which to base the score.

HAVING OR GETTING GOOD CREDIT DOES NOT COST---IT PAYS!

Is credit standing between you and the purchase of your new home?

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