Credit Score is the assessment of creditworthiness

Your credit rating reflects your creditworthiness or trustworthiness to the lenders. They assess your repayment ability by running your credit score. Your credit score is a very important number in your life. It affects the amount of monthly mortgage payment you need to pay on a loan, your insurance premium, your car loan payment and various other things.

You must understand why credit score carries so much importance for you. This score is worked out based on items that are listed on your credit report. The higher is your score, the better it is for you. If you have a good score, then it’s simpler for you to qualify for credit at lower interest rates and affordable terms and conditions.

Your credit score is made up of the following information:

• 35% of your score is based on your payment history. The payment history is affected by both timely payments and defaults.
• 30% of your score is based on your outstanding balances. This can be any type of debt that is yet to be paid.
• 15% of your credit score is based on the time frame for which you had a confirmed credit history
• 10% of your score is based on the number of credit checks or credit inquiries made.
• 10% of your score is based on the different types of credit that you carry.

If you have been recently turned down for a loan, the most probable reason is your unsatisfactory credit score. You might even face problems in getting a telephone connection if you are suffering from poor credit.        

You should know why having a good score is essential for you. Lenders would hesitate to extend money to you if you have poor credit. Poor credit results from both non-payments and delayed payments. Whenever lenders come across a faulty payment history, they express doubts about your ability to pay the loan back on time. As a result, your chances of qualifying for a loan go down. A FICO score of 700 or over is considered as a good or excellent score. On the other hand, a FICO score of less than 580 is regarded as a bad score.