One’s credit score is a key feature of one’s credit report, which serves as an objective conclusion to one’s overall eligibility for a certain financing or other relevant offer. Referring to it landers as well as employers, mobile phone companies, government departments and even landlords determine on the risk they undertake in dealing with a certain individual. Credit score attractiveness is crucial for one’s opportunity to get a mortgage loan, to be offered a rent contract or even to be hired on a certain position.

The most widespread version is the FICO credit score founded by the Fair Isaac Company. However the exact calculation of one’s FICO score varies slightly from one credit bureau to another. The credit score ranges between 300 and 850 having two critical points to split the scale in three key borrower profiles:

Prime – one qualifies for a good credit score with above 680 on the scale. He is considered for the lowest interest rates for he is categorized as a credit worthy individual.

Sub Prime – everyone of score lower than 680 falls in this middle category and poses a higher risk for the landers thus he’s offered higher loan rates.

Shafted or Risky - having score below 560 is considered to be an individual of low likelihood to pay back his debts and thus is offered the least favorable terms, highest rates and additional fees on loans and other deals. Furthermore those individuals are not considered eligible for the full portfolio of home or other loans and on several occasions they may even be denied a job in certain companies.

In order to understand what contributes to one’s good credit score or what actually decreases its value, we are to scrutinize its 5 main components. The credit score is calculated on various terms depending on the different credit bureau, however the weights of the 5 key parameters go as follows:

Payment History 35% – an overview of one’s past way of managing his debt with an accent on the most recent tendencies. Main areas of monitoring include: late payments, delinquencies, bankruptcies, suits, etc. The longer one’s credit history – the better, because the lender will have enough information for making a conclusion on one’s payment customs and general practices.

Debt Level 30% – refers to the balance between credit available and debt to be covered, the farther away one stays from his own credit limits the better his score is (example – keep a 30% off the limits credit card balance).

Credit History 15% – the more comprehensive the information on one’s way of managing his loans the easier to draw conclusions on his efficiency and reliability. People at earlier age do not have a long credit history, however they still may score high if they clear on the other factors.

New Credit Inquiries 10% – includes information within one year period and examines the number of loan applications one has in his file. This parameter affects the total score because the more numerous the new accounts are, the more difficult it would be for one keep up with covering them all in the due time.

Credit Portfolio 10% – describes the different credit accounts one has applied for (example – mortgage and credit cards). The rates of the different plans offered, the payments accumulation etc, they all reveal how well one manages his credit mix.

Having studied this closely one can easily take actions into improving his credit score, so that one can take advantage of preferential loan rates and credit terms customized to his needs.