Know Your Credit Score

How is your credit score calculated?
Credit scores analyze the credit-related information that is found on your credit report. Since FICO scores are used most often, here is how these scores assess what is on your credit report.

1. Your payment history is about 35% of a FICO credit score. Make your payments on time!

2. How much you owe is about 30% of a FICO credit score. The more you owe - the lower your credit score.

3. The length of your credit history is about 15% of a FICO credit score. Longer history can increase a score.

4. New credit is about 10% of a FICO credit score. Applying for a lot of credit can actually decrease a score.

5. Additional factors are about 10% of a FICO credit score. A mix of credit cards and mortgages is normal for most people with a long credit history and can increase your credit score.

Know Your Credit Score
All Americans are able to receive free credit reports every year. The free credit reports are a result of the FTC's final ruling under the Fair and Accurate Credit Transactions Act.

Due to the ruling, the three major credit reporting agencies, Experian, Equifax and TransUnion, are each required to provide you, upon request, a free copy of your credit report once every year. Each credit reporting agency offers a different type of credit score to consumers. FICO score by Equifax (300-850), Experian (330-830) and TransUnion (150-934).

The reports will not automatically be sent out to you. If you want a report, you will need to request your information online, by phone or by filling out a form request and mailing it. Of course, doing it online is much easier.

You'll be able to order all three of your credit reports at one time, or at different times throughout the year. It's your choice. But, be sure to order from the centralized agency. If you go directly to the credit reporting agencies, you will be charged unless you fit other criteria for a free report.

The new ruling doesn't replace the other ways to receive a free credit report. If a company denies you credit, insurance or a job because of something in your credit report, that company has to tell you which credit bureau provided the information. You are entitled to a free credit report from that bureau within 60 days of being turned down.

When you request your free credit report by phone or mail, inform the credit agency that you were denied credit, insurance or a job. The credit bureau will check to see if it indeed provided information to the creditor, insurance company or employer that turned you down. Because bureaus are not notified when you are denied, they have to take your word for it.

You also are entitled to a free credit report if you are on welfare, are unemployed and plan to look for a job soon, or your credit report is inaccurate due to fraud because of identity theft.

To obtain additional copies of your report, in excess of what is allowed within a year, most states will charge a fee ranging from $1 to $10. A more complete version, which includes your credit score and explanations on how it was obtained, costs a few dollars more. Now, do you know your credit score?

Spend some time researching your credit information so that you can make informed financial decisions.