Here's how your credit score is figured out. There are three major companies in the United States that participate in reporting credit scores and histories each with a different method. That is why your credit score is a little different at each of the companies. Here are some factors that you can take into consideration if you want to estimate your credit score on your own.
The first thing is that you will have a credit score of zeor if you have never owned a credit card or had any type of bill in your name or if you have borrowed money of any kind. It is hard to get a loan if you have no credit even though this is not considered to be bad credit. However, some companies will take a chance on someone with no credit. It is much better to build up your credit little by little as you go by having cards in your name and living a comfortable and stable life within your means of income.
Your credit history is very important and makes up about 35% of your total credit score. If you have debts that have defaulted or bills that are not paid, you will hurt your credit score for 7 to 10 years before they are all erased. You need to know that if you make bad choices with credit it will hurt your credit in the future. Even if you are repaying these debts now, chances are they will still show up on your credit report as bills that were paid late. It is a good idea to start building credit as soon as you can even if you don't need to borrow money. You will need a good credit score to buy a house. As long as you have a bank account, your credit score will improve as time goes by. You will have a better score the longer you are employed or maintain the same residence. It shows you have a stable life.
The 30% of your credit score depends on what you currently owe to creditors. Even if you are not late on paying your bills, if you have many loans out at one time, it may be possible that you are denied to have another. Therefore it is important to only take out the loans you really need and to repay them on time or early if you can. If you pay off your loans early, you will not only see your credit score rise, you will also save money on paying interest. This will show favorably on your credit history. You will also want to try and keep your money in one place if possible. 10% of your credit score is going to be based on new accounts. They will look at how many different types of loans you have applied for and how many you have open now. It is not recommended to open and close accounts too fast.
Make sure you just use common sense and you will be fine. Knowing what your credit score is and how it is calculated will help you find mistakes on it. You should review your credit report annually and you are entitled to see a free copy.
