Your personal credit rating is a three-digit score that helps creditors decide whether to extend a loan to you and at what interest rate. It can also determine where you live and work. There are five factors that affect your score according to MSN Money, with the following credit rating guidelines showing you how you can improve your creditworthiness.
Basics
Three credit bureaus exert tremendous influence by issuing credit reports and credit scores. Experian, Equifax and TransUnion keep tabs on your credit, and free copies of your credit report are available online at AnnualCreditReport.com. A small fee is charged to you if you want to receive your credit score from at least one of the three companies.
Payment History
The largest of the five components determining your credit score is your payment history, which makes up 35 percent of your score. If you pay your bills on-time each month, then your credit rating will benefit. However, if you are late or file for personal bankruptcy, your score will suffer a corresponding dip.
Outstanding Balances
Owing too much money to creditors can work against you. What you owe others makes up 30 percent of your credit rating, with FICO and the credit reporting bureaus taking a look at the number of creditors you owe money to and how much of your available credit you are using. Consider paying down some balances in order to raise your credit rating.
Credit History
A short credit history can work against you while older, established credit accounts can help increase your credit score. You cannot do anything about new accounts, but if you have managed them well, then this 15 percent slice will have only a minimal impact on your score.
New Credit
Just 10 percent of your FICO score consists of new credit accounts. Even just applying for an account can lower your credit score, so keep your credit rating strong by only applying for new credit cards and consumer loans with care. If you are rate shopping for a new loan, then do all of your inquiries at the same time so FICO will count these inquiries as one. Spread these applications out for more than 30 days and your credit rating will drop.
Credit Mix
The final 10 percent of your FICO score consists of your credit mix, which represents the types of accounts you have open. These can be credit cards, student loans, consumer loans and mortgages. A variety of debt can work for your benefit.
Considerations
Each of the three credit reporting bureaus calculates scores somewhat differently, using their own version of the FICO scoring method to assign a score to you. You can ask creditors which score they used when reviewing your creditworthiness.
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