How Is My Credit Score Calculated?
But their scores could drop farther if the consumers credit reports show multiple delinquent accounts. The formula also allows for consideration of one major delinquency on an otherwise clean report.
However, multiple delinquencies will cause the score to drop.
The new system not only shows the how likely they are able to pay back debts, but it gives some insight as to how well they also manage debt in general. Additionally the FICO score calculates the ability to manage multiple types of debt. For instance, FICO will reward people who have both revolving debt (credit card) and installment loans (auto and home loans). A person who can effectively manage many types of loans is considered more credit worthy.
According to the current scoring model, to get the highest score, you need to:
* be at your job for over 5 years,
* be in a professional occupation
* have lived in the same home (that you own) for over 10 years,
* have had credit and loans for many years,
* have almost no debt,
* and not have applied for any new loans for the last two years
Ultimately, to keep your credit score up and show financial worthiness you must be a good steward of your finances. If you do not have a higher score, there are many ways to help raise it. FICO recommends that you pay your bills on time, keep your credit card balances low and take on new credit only when you really need it. They also offer a slideshow about credit scoring on their website that is very helpful to information seekers [http://www.ftc.gov/bcp/credit scoring/present/sld001.htm]. Now that you know some of the ways credit scores are calculated, you can take advantage of various tips that will allow you to increase your credit score.
Source: Fair Isaac Corporation - FICO [fairisaac.com]
myFICO [myfico.com]
