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Analyzing Your Credit Chart and Credit Score

By Ruth Racey
Published: Sunday, September 20th, 2009

In order to build a good credit history, it is important to understand how your credit score is calculated. The FICO score is the three digit figure in your credit report to which potential lenders and insurers can base their decision to approve your credit application. To better understand how individual scores are summed up, let us take a closer look at the contents of a credit report.

A credit report or a credit chart is issued by three major credit reporting agencies for consumers. These reporting agencies are Equifax, Experian and TransUnion. Each of these agencies creates an independent report for each consumer. Where do they get information to put in your report?

Lending companies, credit card companies and insurance companies are the ones who report to the major bureaus. Thus, when you apply for a credit card, when you get a loan or insurance, everything about your account will be reported to the bureaus. This means, the amount of purchases or the amount loaned will be reflected in your chart. Payments including the dates they were submitted will also be reflected in your credit chart.

However, details about personal savings or checking account are not reported to the bureaus. In order to start building your credit history, you can apply for a credit card or a loan since these are the types of accounts monitored by the bureaus.

Based on the details of your chart, your total credit score will be calculated. You will be given a rating based on certain categories. These categories include the length of your credit history or how long you have established credit, the types of account you have, your credit-to-debt ratio, and your payment history. Although other lenders may use a different credit scoring model, the FICO scoring system is a recognized model and is the one used by the major credit bureaus.

A credit score can range from 300 to 850. The higher your score, the better your rating will be. This means enjoying a higher rating will make you a more impressive customer in the eyes of lenders. You will surely get an approval without questions and be qualified to enjoy the best deals that a lender has to offer.

A big factor in raising your rating is proper management of your accounts. If you own a credit card, make sure not to exceed your credit line and that you are submitting your payments on time. If you have an existing loan, see to it that you can keep up with your monthly payment schedule.

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