The credit score is a numerical measure of how creditworthy an individual is. The more creditworthy one is, the lower the risk of the lender. The credit score is the result of a credit check, which takes into consideration practically all the financial transactions of an individual over a given period of time.
The most widely used rating system for credit scores is the FICO method. FICO stands for Fair Isaac Corporation. In this method, the lowest score than one can get is 300, while the highest score possible is 850. The nearer your score is to 850, the better your chances of getting approved for a loan and for getting better terms and interest rates as well.
The exact method of computing the credit score, or credit rating, is not publicly known. In general, however, we are aware of certain factors that come into play when the FICO score is calculated. Some of these factors include one’s payment history (payments made on time, missed payments, and late payments), outstanding loans and debts, kinds of credit, length of credit history, and number of active credit cards as well.
It is vital that you pay close attention to your payment history as this plays a very critical role in the calculation of your credit score. The important thing is that you do not miss any payments or make any late payments. Otherwise, a single incident may bring your credit score down considerably.
You may obtain a copy of your credit report from any of the credit bureaus at any time.