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Your Credit Score No Longer a Mystery

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					                  Your Credit Score No Longer a Mystery

For most people, credit scores remain a mystery. Sure, a lot of us know 800 is a great
score, 700 is good, and anything below 600 is bad. But what actually determines this
number? What are the factors influencing this number which has the power to grant you
the house or car of your dreams or shatter them into oblivion?

Your credit score, also known as a FICO score are calculated from a lot of different data
in your credit report. You have three FICO scores, one for each of the three credit
bureaus: Experian, TransUnion, and Equifax. Each score is based on information the
credit bureau keeps on file about you. As the information in your credit report changes,
your credit score will change as well. Your 3 scores affect both how much credit will be
extended to you and on what terms (interest rate, etc.). Post-bankruptcy your scores are
likely to be quite low, but you can take steps to rebuild your credit thus increasing your
FICO score.

What is needed for your scores to be calculated? For your three FICO scores to be
calculated, each of your three credit reports must contain at least one account which has
been open for six months and updated within six months. This ensures that there is
enough recent information in your report on which to base your FICO scores.

What factors influence the scores?


   1. Your payment history. This is the likely to be the strongest factor influencing your
      credit scores. Your payment history includes all types of accounts (credit cards,
      retail accounts, installment loans, finance company accounts, mortgage, etc.) and
      whether or not you paid each account on time and how much. If you are past due
      on any accounts this is also reflected in your payment history. The severity of the
      delinquency is also noted as well. Also included in payment history are any
      adverse legal actions against you such as judgments, foreclosures, liens,
      garnishments, and collection items.

   2. The number of accounts you have open and paid as agreed is also reported.

   3. Type of credit lines you have available to you. Revolving credit such as credit
      cards or installment credit such as loans are both important in determining your
      credit score. If you are using revolving credit, are you maxing out your credit
      cards or are you well within your credit limit? If you have installment loans, how
      much do you still owe on the balance of loan?

   4. Length of credit history. This is another important factor. How many accounts do
      you have open and for how long? How recent are the account activities?

   5. New credit lines. How many recently opened accounts do you have? How many
      recent inquiries have there been on your credit report? (hyperlink to hard vs soft
      inquiries). If you have had a re-establishment of positive credit history after
      bankruptcy, this will be noted as well.
   6. What type of credit are you using? Are you using both retail store and major
      credit cards? Do you have installment loans such as auto loans and mortgages?


Your FICO scores take all information in these categories into consideration. No one
factor alone determines your score. Your credit report looks at all your available financial
information to determine your score. It's impossible to say exactly how important any
single factor will be even the levels of importance shown here are for the general
population, and will be different for different credit profiles. What's important is the mix
of information, which varies from person to person, and for any one person over time.

While your FICO score is an essential factor in your financial life, it's important to
remember that lenders will look at other things such as your income and how long you
have been at your present job.

				
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