Tips to help you build your credit score

The Fair Isaac Corporation is a company that developed FICO scores, which is a measure of credit risk, this system of measurement is the most used system in the world in calculating your credit score. The system bases its calculations of your credit worthiness by statistically analyzing what you have done in the past. The exact formula that is used is not disclosed, as the company reserves the right to disclose how the information is formulated.

Almost everything that you do however creates a record somewhere, whether it is paying your electric bill on time, or charging your credit cards to the maximum there are records kept that reflect the type of financial activities that you participate in and your timeliness in paying off your debts. The Fair Isaac Corporation makes an analysis of your credit history reported thorough the three major credit bureaus, and then creates your credit score based on that analysis.

The three major reporting agencies in the United States are, Experian, Equifax, and Transunion. Whenever you request a loan, the lender will do a credit check on you, this will mean that they are getting a report of your credit history from one of the three major credit reporting agencies, in some cases, like mortgages, they may ask for reports from all three reporting agencies. These agencies as well as others collect as much information about a consumers credit as they can and sell that information to businesses. This information is gathered throughout the consumers lifetime, and the Fair Isaac Corporation score is determined on your activities over your lifetime. These businesses in turn use that information to determine whether the consumer is a good risk or not, however the cost of the credit report is usually passed onto the borrower.

There are ways that you can improve your credit score. One of the first things you will want to do is get a copy of your credit report from all three of the major reporting agencies. Look the information on each report over. If there are items contained in any of the reports that are not correct work on correcting them. Contact the agency that reported the item and have them correct it. You may have to send the agency a letter, and work with them on the specifics of the report. There can be many mistakes made on a credit report, also if you are not checking your credit report often you may be a victim of identity theft and not even realize it. Your credit score is a determining factor in costs passed to you in your premiums in almost everything that you do. Most car insurance companies look at credit scores to determine your risk level in your automotive insurance, your premiums may be higher simply due to the fact that you have a lower credit score. You may have to pay deposits for electric services, phone services, cable services, based on your credit score. So even though you never plan on getting any type of loan or acquiring credit cards, your credit score may still be impacting your life. Start monitoring your credit reports now, understand the information that they contain and how to ensure that that information is true and accurate.

You will want to pay your bills on time. There may be times that you can not, this happens to almost everyone at some point in their lifetime. So if this happens to you make sure you contact your creditors and explain your situation, most creditors will work with you to help devise a plan that will help you through this tough time. They can not help you however if your are not letting them know what is going on.

One way to help build your credit score is to get a short term loan and pay it back right away. Another way is to keep your balances low on your credit cards. Even though you may have a $10,000 limit on your card, you will not want to have your card maxed to that limit. Try to keep your balances low around 1/5 of what your max is, this shows that you are responsible with money and helps build your credit worthiness. Keeping your cards maxed out makes you a high risk to lenders. Shop around for lower interest credit cards that will allow your to transfer your balances from the higher interest cards. There are quite a few companies that will offer a low interest transfer rate for a certain period of time, this will help you get that balance paid off and save you tons of money in interest fees. One thing that you will not want to do is pay only the minimum monthly payment on your credit cards. Most of the time those minimum payments are covering mostly interest charges, so try to pay as much on your monthly payment as you can to get those principal balances down.

Another thing that you can do is get help from one of the many debt relief agencies, and learn how to manage your budget to control your spending habits.