>By Natasha L. Foreman, MBA
I just read an insightful article How Your Credit Score is Calculated written by Simon Zhen that explains how your credit score impacts your life, how it is calculated, and the benefits of earning and keeping a good credit score. As many of you may know your creditworthiness is based on a Fair Isaac Company (FICO) credit score with a range of 300 to 850. The FICO score is calculated based on certain measurements:
1. Payment History (35%): the most impactful on your credit score
2. Amounts You Owe and Credit Limits (30%): this measurement looks at your debt utilization ratio which is the total amount you owe divided by total amount you borrowed (and/or can borrow)
3. Length of Credit History (15%): the longer you have had credit the more experienced you are as a debt manager- and most likely the higher your credit score
4. Types of Credit (10%): revolving credit (credit cards) and insallment credit (mortgages)
5. New Credit Inquiries (10%): every time you apply for credit it is recorded on your credit report whether you receive the new line of credit or not.
This article gives you a breakdown of these five measurements and even provides a link to a MyBankTracker article, How to Make Yourself Creditworthy: The 7 Don’ts of Credit that is very informative and helpful.
To read the Zhen article for yourself visit MyBankTracker
Let 2011 be the year you reclaim your credit and your life!
Copyright 2011. Natasha L. Foreman. Some Rights Reserved.