Credit scoring is a system that creditors use to summarize the information in your credit report when they are deciding whether to give you credit, and if so how much to charge you for it. Information about you and your credit experiences, like your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report.
The FICO score is the credit-scoring model that most lenders use to determine if you are creditworthy. A FICO score is calculated using a computer model that compares the information in your credit report to what's on the credit reports of thousands of other customers. FICO scores range from about 300 to 900. Generally, the higher the score, the lower the credit risks.
Do you wonder what goes into that mystical number known as your credit score? FICO scores consider five main factors. Your past payment history is the most important factor for your score. Your outstanding debt is the second most important factor. The length of time that you've had credit is the third most important factor, followed by any new applications for credit and the types of credit that you have. Use this knowledge to improve your credit score by paying attention to the most important factors keeping on-time with payments and keeping a reasonable level of debt.
What Goes Into Your Credit Score
10%-New applications for credit
15%-How long you've had credit
10% -Type of credit
35%-Past payment history
30%-Outstanding debt