Ninja Money Masters

What exactly is a credit score?

Just as your blood pressure and cholesterol count are evidence of your physical health, your credit score is the key indicator of your financial health. It’s used by banks, mortgage lenders, and credit card companies to predict your ability to pay your bills and loans on time. There are many different methods used to compute your credit score. The majority of banks (over 90%) use the FICO score provided by the Fair Isaac Corporation.

How are credit scores calculated?

Credit scores are calculated based on the information contained in your credit report. This information is collected by three different credit bureaus:

• Equifax
• Experian
• TransUnion

The information in your credit report includes your:

• Name(s)
• Social security number
• Current and previous addresses
• Credit history (payments on credit cards, mortgages, and loans)
• Public information data (judgments, liens, bankruptcies)

According to FICO, their scores are composed of and weighted as follows:

It’s very important for this information to be accurate. You can get a free copy of your credit report three times a year.

To find out how to increase your credit score, download the free report 25 Ways to Raise Your Credit Score.