How to Figure Your Credit Score

It doesn't get any worse than this: Your car has taken its last breath and you need it to go to work. You find a new one, but the loan arranger at the dealership tells you you've been turned down for a loan, or will pay high interest, because of bad credit. You weren't aware of this problem because, like most people, you didn't check your credit score before you applied for that loan. In fact, you probably don't know how a credit score is figured, either. Here's some helpful information to help you determine yours.

Instructions

1

Know how reliably you pay your bills. Your payment history is the most important factor in determining your credit score, and accounts for more than 1/3 of what makes up your score. If your are continually late in making payments to your creditors, the credit bureaus will downgrade your rating depending on how late the payments are received. On the other hand, if you always pay your creditors on time, that fact will normally result in a higher score.

2

Determine how many credit cards you have and how much credit they make available to you. How you manage these accounts will weigh about 1/3 in arriving at your credit score. For instance, the credit-reporting services will consider that you do not manage your finances responsibly if you are continually maxed out on your cards or are dangerously close to your limits. As a rule, your outstanding balances should not exceed about 1/3 of the credit you have been granted. By keeping your credit-card balances low, you will have a higher credit score.

3

Understand that almost every institution in the U.S. that passes judgment on your creditworthiness relies on information from only three credit-reporting companies: Experian, Transunion and Equifax. Every year or two, ask each of them for their reports on you. First, they will give you your score--a strong indication of whether or not you will get your next loan, or if you will pay more interest because of a low rating. Furthermore, those reporting agencies do make mistakes, so it is always a good idea to advise them when your score has been impacted negatively by those mistakes. Finally, if your score is lower than you'd like, the reports will show you how to make improvements in how you manage credit.