The three-digit credit score, sometimes called the FICO score, ranges from 300 to 850. It is the most widely used measure of a person’s credit standing. Credit scores are sometimes called FICO because they were initially formulated in the 1950’s by a company called Fair Isaac Corp.
Lenders use this score to determine your credit worthiness and how much interest they need to charge to cover their exposure if you don’t pay your debt.
It is all about your credit history.
Here are ways to improve your credit score:
. Pay bills regularly and on time.
. Don’t max out on your credit lines or home equity lines.
. Don’t shuffle debt between different accounts.
. Make more than your minimum monthly payments.
. Review your credit report annually for errors.
Another important factor that is overlooked is the “balance-to-limit ratio.” This measures what percentage of available credit is being used. Keeping your credit utilization to 50% of available credit is recommended.
For example, if a consumer has three credit cards, each with a $2,000 credit line carrying a total balance of less than $1,000 per card will likely keep a credit score from declining.
By keeping your credit score high, you will be eligible for lower interest rates when you apply for loans, and credit card companies will be willing to offer you low interest credit.