FICO scores indicate a person’s credit history. They are used to determine income and current debt. A good credit score will give you more options, and allow you to access lower interest rates. Landlords and utility companies may also consider your credit score. If you don’t have a high credit score, it may be necessary to increase your score to get a loan.
Payment history
Your payment history is an important factor in determining your credit score. It is a record of when you have paid a debt and how much you owe. Older negative entries will eventually disappear from your report. The latest FICO model also incorporates trended data covering the past 24 months. This can help lenders assess if your ability to repay your debt completely.
Payment history refers to your payment history on all of your accounts, which gives lenders a snapshot of your repayment behavior. Your credit score can be seriously damaged if you miss a payment or send one to collections. This is because lenders see you as a high-risk borrower, if you fail to make your payments on time.
Accounts owing
The number of accounts you have is one of the biggest factors that can affect your credit score. This category represents 30% of your total score. New credit card accounts directly impact this number. It includes both the type of accounts and the balances. The greater your chance of being overextended the more accounts that you have.
Your debt can be paid off to improve credit scores. Credit scoring models look at many factors to determine a person's overall credit score, and the amount of debt is a major component of that. A high amount of debt does not automatically make you a higher risk. However it can make it more difficult that you meet your monthly obligations.
Credit history length
The length of credit history is one important factor that determines your credit score. Credit score considers the age and length of each account. Your credit history should be at most six months old. However, if a new account has been opened, your credit history may be much shorter.
FICO uses the average credit age of all your accounts to calculate your credit history. This figure is calculated by adding the ages of each account and dividing them by the total number of accounts. The average age for credit accounts is approximately 8 years. When calculating your credit history, it is also taken into account the duration of each account and the time since their opening. FICO does not make public these factors.
New credit
Your FICO score will take into account recent activity, such as the time you have been applying for credit and having new accounts. Lenders also will consider when you last applied for a loan and can lower your score by a few point. Your score will depend on the type and amount of credit you apply to.
The good news is that there are two ways to improve your score: by paying your bills on time and by using available credit responsibly. Start by checking your credit report. It takes less than two days to get your credit reports. Setting up due-date notifications on your credit cards is another way to monitor your credit. While it takes a little time to set these up, it's an excellent start to improve your credit score.
VantageScore
VantageScore is a credit rating that was first introduced in 2006. FICO is the credit score that is calculated from the credit report. VantageScore, however, is not based on it. FICO relies on data from the credit bureaus. VantageScore, however, uses data about consumer behavior for a two-year period. Consumers need to be able to distinguish between FICO and VantageScore scores and understand their impact on each other.
VantageScore has both its benefits and its drawbacks. One advantage is that it is easy to understand and compare. Equifax Experian and Transunion designed the VantageScore System with the goal to be consistent, understandable, and simple. It also uses letters rather than numbers.