Common Things That Improve And Lower Credit Scores
News from San Francisco Chronicle:

A credit score is a numeric expression that helps lenders evaluate a person’s credit report and estimate the risk of extending credit or loaning money to people. A person’s credit score is provided to lenders by the three major credit reporting agencies, including Equifax, Experian and TransUnion. The most common credit score is the FICO score, named after software developer Fair Isaac and Corporation.

Since a person’s credit score affects his or her ability to qualify for different credit types and varying interest rates, it is in a person’s best interest to achieve the highest credit score possible. Understanding the factors that can negatively affect a credit score can help people work towards a more favorable score. This article will introduce how a FICO score is calculated, what factors are not included in a FICO score, and the common things that lower a person’s credit score.

How is the FICO Score Calculated?
It is helpful to understand what factors are considered when determining a person’s credit score. A FICO score is based on five factors:

  • 35%: payment history
  • 30%: amounts owed
  • 15%: length of credit history
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Related News:

Realtors share the 10 top myths about credit scores
News from San Jose Mercury News:

Since lenders have tightened their loan requirements, there has been much concern about credit. Unfortunately, many borrowers do not have the correct information about how credit scores are evaluated, according to professional credit specialists.

“Certain facts about credit will affect you and any financial decision you make or are about to make, so it’s important to have the correct information,” says Julie Macc, a certified credit and identity theft specialist with the Century Law Group.

Macc notes your credit score is based on the following components: past delinquencies, 35 percent; debt ratio, 30 percent; average age of file, 15 percent; mix of credit, 10 percent; and inquiries, 10 percent. She asked members of the Silicon Valley Association of Realtors to share with their clients the following top myths about these components and how credit scores are evaluated.

Myth No. 1: It is good to pay your credit card balance in full. If you pay off a balance and leave a zero balance account, you will have no payment history. After six months, some companies look at it as an inactive account, which can be closed due to inactivity. It is best to leave a small balance every month (ideally 1 percent) to show you can pay on time.

Myth No. 2: I don’t need to check my credit because I pay my bil…………… continues on San Jose Mercury News

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