#Credit Scores Credit Reports

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When it comes to your finances, your credit score (also known as FICO score) is very important. The higher your credit score, the more likely you are to have banks competing to offer you lower and lower interest rates when you apply for a loan. A bad credit score can make it very difficult to even qualify for a loan, let alone a low interest rate. Potential landlords, insurance companies, and utility providers such as cell phone carriers may also take your credit score into consideration before renting to, or doing business with you.

Several types of data are factored into your credit score. In general this data is grouped into five categories – each accounting for a certain percentage of what is factored into your credit score:

• Payment history – paying your bills regularly and on time will have a huge impact on your score.
• Amounts owed – the amount of debt you owe vs. the amount you have been approved to borrow from (your debt to credit ratio).
• Length of credit history – the length of time you have held your accounts. The longer you have held a line of credit the better.
• New credit – the number of recently opened accounts or credit inquiries. Opening new accounts can cause your score to drop slightly. Maintaining your accounts in good standing for a longer period of time will increase your score.
• Types of credit used – your score will be higher if you are able to responsibly juggle a variety of different types of accounts including credit cards, installment loans (like a car loan), mortgages and retail accounts.

Even for people with poor credit, improving your FICO score is possible, but you must be vigilant. Always pay your bills on time, pay down your debts and keep tabs on your credit report.

Credit reports. Check your credit report to make sure you are aware of what your shortcomings may be or to spot any inaccuracies that may be on it. You can request your credit report for free from each of three reporting bureaus every year by visiting www.annualcreditreport.com. however you will have to pay to see your credit score.

There are other companies that offer credit reports, but will require you to buy a product or service before you can access your report.