HOW IS MY SCORE CALCULATED?

What is a Credit Score?

A credit score is a number that ranks a consumer's credit risk based on a statistical evaluation of information within the consumer's credit file, that has been tested and proven to predict future loan performance.

In simpler terms... a credit score is just a number that represents the risk of you defaulting on a loan, by reviewing history on your Consumer Credit Report.

How is a Credit Score Calculated?

Credit Scores are calculated through mathematical algorithms. Each algorithm used to calculate credit scoreing is unique, so we work with our clients to identify their personal goals and work to restore their individual credit to best fit their upcoming needs for credit. For example: if your goal is to purchase a new home or refinance your mortgage loan, then your credit consultation plan should focus on improving your FICO score, which is the score used by mortgage lenders. (Read below to find out more about the different factors that can affect your credit score.)

What is a FICO Score?

The FICO score is the best-known and most widely used credit score model in the United States. It provides a snapshot of risk that banks and other institutions use to help make lending decisions. Applicants with higher FICO scores might be offered better interest rates on mortgages or automobile loans as well as higher credit limit amounts.

The FICO score is based on five different weighted factors:

Payment History: The record of your on-time and late payments
Available Credit: Your credit limit minus the amount you owe for each account
Length of History: The time elapsed since each account was opened
Number of Inquiries: Records of inquiries logged when you apply for credit
Type of Credit: Mortgages, installment loans, revolving accounts, etc.

What are Non-Factors of Credit?

Efficient credit optimization requires an awareness of factors that don't impact scores to avoid wasted effort. The FICO model does not incorporate any of the following factors:

*Age

*Education

*Income

*Race

*Marital status

*Length of residence

*Gender

*Disability

*Length of employment

*National origin

*Public assistance

What are Some Simple Ways to Improve My FICO?

With all the different kinds of information that credit scoring models incorporate, numerous tactics for improving scores are available. However, any action to improve a score must be taken seriously.

* Make payments on time, especially to installment loans (like mortgages, car loans, student loans, etc.) and revolving accounts (like credit cards and lines of credit), as these report to the bureaus monthly.

* Do not apply for any new credit cards or loans.

* Pay credit card balances down to 30% of your credit limit or less.

* Make sure your credit card company reports your limit to the bureaus.

* Keep 3-5 open and active accounts in good standing on your credit report.

* Review your credit report every year.