Education for All

There’s a lot of confusing information about credit scores out there. Once you understand what a credit score is, how it affects your life, and why it is important to build and maintain good credit, you may also want to know how, exactly, a credit score is calculated. There are some factors you can take into consideration if you want to check credit score.

First, if you have never owned a credit card, had bills in your name, or borrowed money of any sort, your credit score is zero. While this is not considered bad credit, it is almost as hard to get a loan with no credit as it is with bad credit. Some companies may be willing to take a chance to give credit cards for people with bad or no credit score, but it is much better to build up a little credit by owning cards, and living a stable life.

Credit history is about 35% of your total credit score. Bills that have gone unpaid or debts that have defaulted will hurt your credit score for 7 to 10 years before they are erased. Another 15% of your credit score is length of credit history. It is important to start building credit as soon as possible. Your credit score will improve with age as long as you maintain bank accounts. Information such as length of employment or residence can also fall under this category, so if you have a very stable life, you’ll have a better score than someone who moves around often. About 30% of your score depends on what you currently owe. It is important to only take out the loans you really need and to repay them on time or early if at all possible. 10% of your credit score is based on new accounts. They will look at how many different loans you’ve applied for in the past and how many different accounts you have open. By knowing how your credit score is calculated you can easily spot mistakes, which may hurt your credit now or in the future.