What did you get: 450 or 710? Is it a FICO or a FAKO score? What credit bureau did the evaluation? Does any of it matter?

Yes it matters. It can be significant if you need a car loan or a mortgage from your bank. This is what a bank or lender uses to determine if you will get the credit you are asking for. The creditor can use the single three digit credit score to make a decision that is objective. They don’t have to go through each credit card or loan you have had previously. There are essentially three credit major bureaus that do most of the evaluations. If you are applying for a loan, you should know all of them. Your credit score is simply a three digit number that rates your history of credit and places you in an overall position in relation to other people. It can be looked upon like your high school SAT or ACT score. It is a numerical score of where you stand.

FICO credit score is a brand name for credit scoring. It was developed by a specific company. All other scores are labeled FAKO scores. They are all calculated in a similar manner but we do not know the specific formulas used for each calculation by each company. The methods are undisclosed to the public but similar. Thus, the credit  score may vary a bit from each other. But if you have bad credit, they will all be low. If you improve, they all will go higher.

What determines your credit score? Several factors are used by the credit bureaus to arrive at the magic number. First, your past history is most important. The lenders need to know that you pay your bills and have done so regularly and dependably in the past. Are you up to date or are you late. Have you had a bankruptcy in the past? Have you been turned over to collection agents or done a debt consolidation. This make up 35% of the evaluation. Next, 30% comes from your credit limit. How much do you owe compared to the total amount you can borrow is known as your credit utilization. This should be limited to a 30% ratio. The longer your credit history the better the credit score is. This makes up 15% of your credit score. If you have zero balances on several cards, it is best to keep them open. Don’t close them—just keep them at zero. The kind of credit you have is looked at. The more diverse, the better it is. Finally, the last 10% is concerned with any account inquiries you have. If you have a lot of applications for credit, it is a negative. It may indicate problems if you have a lot of credit cards.

There are many things that can hurt your credit score and are common sense things you should avoid. Paying a charge late or not paying at all is not acceptable and will be a negative. Bankruptcy or having charges written off hurt significantly. If you run high balances consistently you may be considered a higher risk. Avoid these and you improve your credit score.