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The term "credit score" refers to a method of measuring credit worthiness or reliability by assigning a numerical value to a series of characteristics to be measured for making such determinations. There are more than 100 characteristics that are drawn from a variety of sources, including credit reports and public records. These numbers are then used in the creation of credit report scores. The Fair Isaac Company created the system that is most commonly used for this purpose, which is why credit report scores can also be referred to as FICO scores. Although there are several companies that do credit scoring, most lenders use the Beacon FICO score. Credit scores generally range between 300 and 900. A low credit report score can affect a consumer's ability to get a loan or mortgage. It can influence the rate of interest a consumer is subject to in financial dealings. It can also effect transactions that seem, on the surface, to be unrelated to credit matters. A prime example of this is found in insurance rates.

Up until recently, it was not possible for an individual to check his/her own credit score. This was a calculation only available to lenders and other businesses to whom the score was necessary. However, in 2001, this was altered as a result of the US Congress, industry and consumer groups. There are now a number of websites available for attaining one's own credit score; this includes all three big credit bureaus, and the Fair Isaac website. You may also ask your lender for access to the score at the time when you apply for a loan.

A credit score is calculated in a very similar manner to the way a teacher would grade a student. However, instead of using the grades a student receives on a test or report, the information in your credit report is used for the calculation.

The number on your credit score can range between 300 to 900. The formula to create this score is calculated with the FICA scoring system. However, the basic breakdown of how your credit score is determined works as follows:

35% is your payment history. The score is altered each time you make a late payment, each time your payment is sent out for collection, when you've declared bankruptcy, etc. Additionally, the more recent the offence, the worse the calculation on your score.

30% is outstanding debt. The standard rule is to keep your credit card balances at or below 30% of their limit

15% is the length of time you've had credit. The longer you've had credit established, the better your score will be.

10% is the number of inquiries on your report. The more recent these inquiries are, the worse for your credit score. Most scores only count inquiries for the last year.

10% is the types of credit you currently have. This includes all of the different kinds of loans that are available to you. This ranges from credit to credit cards. While there is no specific number or combination that you should or should not have, the time this really comes into play is when there isn't really all that much other information available on your report from which to build your score.

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