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Understanding Your Credit
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What is a credit score?
How is the score calculated? It's a secret exactly how a credit score is calculated but the credit bureaus have reveled the weighting factors in a scores calculation. Payment history - 35% Amounts owed & current account balances - 30% Length of credit history - 15% New credit & recent credit inquiries - 10% Types of credit Used - 10%  What's a considered a good score? Anything over 680-690 will make it very easy for you to obtain credit cards, auto loans, and mortgages. However, a score over 720 will qualify you for the best interest rates. Anything below 680 puts you into the sub-prime area. You will probably be able to get new credit but it will require more documentation and will not be at favorable interest rates. Improving your credit score? The best way to improve your credit score is to pay down revolving credit card balances to below 20% of your credit limit. For example, if you have a credit card with a $5,000 limit try to keep your balance at or below $1000 at all times. Finance companies usually report your balance once per month to the credit bureaus. When trying to improve your score it may take 60 days for your lower balance to be reflected in the report. Always pay your bills on time. Any payments made 30, 60, or 90+ days late will lower your credit score. Don't fret if you have a late payment in the past. Just focus on the future and always pay on time. Dispute any incorrect data in your credit report promptly. See our section on Disputing errors in your credit report for detailed instructions.
How is my credit score used by lenders? In this modern computer age most lenders use electronic underwriting software to speed up the loan approval process. This means that a computer runs your credit in a matter of seconds and gives approval or denial almost instantly. The decision is almost always based on your FICO score. Electronic underwriting is now so sophisticated that large mortgages of over a million dollars can now be approved in seconds. E-loan was a pioneer of electronic underwriting in early 2000.
Comment on this article:
Not understanding credit, credit scores or what credit repair is a common problem.
The credit industry is complicated, aggrivating and annoying. Believe me, I tried myself, then I decided to hire someone and got ripped off by a law firm called lexington credit attorneys, then I tried another company which did nothing. Finally I used a company called credit assistance network in florida and amazingly they did a great job. They were not able to remove everything negative, but they did get most of it off. My point is, be very careful about finding the right solution to your problem because the wrong decison can land you with even bigger problems than you had to begin with.
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