Although there are different ways to calculate credit risk, credit bureaus report a FICO score. Ranging from a low of 300 to a high of 850, the FICO score is drawn from data in your report and helps lenders compare you with other borrowers. Experian (www.experian.com), Equifax (www.equifax.com) and Trans Union (www.transunion.com) are the three major credit bureaus.
About half the U.S. population falls within the 700 range, according to Fair Isaac Corp., which designed the FICO scoring system. As you inch below that range, you'll start facing penalties. Younger people may have lower ratings simply because they don't have a long credit history.
You can build up a record by making purchases with a credit card that you can comfortably pay off every month and making regular, on-time payments on other debt, such as student loans.
If your accounts are less than six months old, you won't even have a FICO score. As an alternative source, sign up at PayRentBuildCredit.com, which allows you to build up credit through your payment record with landlords, utilities and other companies.
Your payment history has the largest impact on your score. Late payments - 30 days or more past due - stay on your report for seven years. Many people find their credit wrecked from health club memberships, cellphone bills and medical expenses that were not canceled or paid off appropriately. Bankruptcy will generally mark your report for 10 years, and unpaid court judgments or tax liens can remain indefinitely.
Don't despair. A credit score always is a work in progress, so even if you're past due one month, your score will improve as you begin to make payments on time again.
Consumer advocacy groups offer these tips to help keep your credit in check:
About half the U.S. population falls within the 700 range, according to Fair Isaac Corp., which designed the FICO scoring system. As you inch below that range, you'll start facing penalties. Younger people may have lower ratings simply because they don't have a long credit history.
You can build up a record by making purchases with a credit card that you can comfortably pay off every month and making regular, on-time payments on other debt, such as student loans.
If your accounts are less than six months old, you won't even have a FICO score. As an alternative source, sign up at PayRentBuildCredit.com, which allows you to build up credit through your payment record with landlords, utilities and other companies.
Your payment history has the largest impact on your score. Late payments - 30 days or more past due - stay on your report for seven years. Many people find their credit wrecked from health club memberships, cellphone bills and medical expenses that were not canceled or paid off appropriately. Bankruptcy will generally mark your report for 10 years, and unpaid court judgments or tax liens can remain indefinitely.
Don't despair. A credit score always is a work in progress, so even if you're past due one month, your score will improve as you begin to make payments on time again.
Consumer advocacy groups offer these tips to help keep your credit in check:
- Keep credit-card account balances to no more than 50 percent of your total debt, and whittle away existing loans.
- Don't let those retail clerks talk you into signing up for the store card. Although it's beneficial to build a long relationship with one or two cards, frequent additions, along with the inquiries lenders must make, lower your score. Leave six months between new cards.
- Never co-sign an account with a friend or relative. Your score is affected no matter who racks up the debt. And, if you're added to an account, you absorb the entire credit history, not just the activity moving forward.
- Review your credit report every year to check for errors. The credit bureaus do not have uniform reports, so you'll likely have to order three at about $10 each. Toward the end of the year, the Federal Trade Commission will start rolling out a policy to access one free report a year from each bureau. To review details, go to www.ftc.gov.