Although people refer to their credit score in the singular, there are many different types. Each of the main credit reporting agencies calculates its own score according to the information it holds about you. Your credit score is not a fixed figure, but fluctuates as you take out more credit or make repayments. You can improve your score by changing the way in which you handle credit.
Definition
When referring to your credit score, most lenders mean the system developed by the Fair Isaac Corporation and known as the FICO score. This number is calculated from various sources and affects how much credit you can get and what you pay for it. It is also used by landlords and utility companies to decide whether to accept your application or the amount of deposit to require from you.
Features
The FICO credit score is a figure between 350 and 850. A score greater than 700 is considered good. The two biggest factors in calculating your score are your payment history and the amounts you owe. Approximately 35 percent of your score is based on your payment history and 30 percent on the total credit you hold. The length of your credit history makes up 15 percent of your score, another 10 percent comes from new credit and the final 10 percent is calculated based on the types of credit you use.
Free Reports
You can obtain a free credit report once every 12 months from each of the main consumer credit reporting companies. Apply online on the Annual Credit Report website or request a report from them by mail. The Annual Credit Report Request Service is the official central site for the Equifax, Experian and TransUnion credit agencies.
Paid Reports
Monitor your credit score during the year by obtaining reports from the three main agencies every four months. Read through the reports carefully and notify any errors to the agency and to the creditor. As of December 2010, each credit bureau charges between $8 and $10 for a report that includes your FICO score.
Warning
Be aware that some companies that offer a free or low-cost credit report and FICO score on their website automatically enroll you in a trial membership of their paid service. If you do not cancel the membership within the trial period, they will charge your credit card each month.
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