Good Credit? Bad Credit? No Credit? No Problem!

A credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the credit worthiness of that person, which is the likelihood that the person will pay his or her debts. A credit score is primarily based on credit report information, typically sourced from credit bureaus/credit reference agencies.

Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system.

Credit scoring is not limited to banks. Other organizations, such as mobile phone companies, government departments, employ the same techniques. Credit scoring also has a lot of overlap with data mining, which uses many similar techniques.

Want to know your credit rating?

The places below allow you to access your credit score so you can see your own numbes! Even if your score is lower than expected you can always improve your rating.

Credit ratings are determined differently in each country, but the factors are similar, and may include:

Payment record: A record of bills being overdue will lower the credit rating.
Control of debt: Lenders want to see that borrowers are not living beyond their means. Experts estimate that non-mortgage credit payments each month should not exceed more than 15 percent of the borrower's after tax income.
Signs of responsibility and stability: Lenders perceive things such as longevity in the borrower's home and job (at least two years) as signs of stability.
Re-Aging: Through re-aging, a credit history is re-written and you are given a fresh start on that particular account. This can dramatically improve the credit score. In 2000 the Federal Financial Institutions Examination Council (FFIEC) clarified guidelines on re-aging accounts for delinquent borrowers.
Credit cards that are not used: Although it is believed that having too many credit cards can have an adverse effect on a credit score, closing these lines of credit will not improve your score. The credit rating formula looks at the difference between the amount of credit a person has and the amount being used, so closing one or more accounts will reduce your total available credit. This in turn lowers the percentage of available credit, and the credit score will drop. The credit formula also factors in the length of time credit accounts have been open, so closing an account with several years of history is another avoidable credit mistake.
Credit inquiries: An inquiry is a notation on a credit history file. There are two kinds of notations:
"Soft" Credit Pulls:
A credit bureau may sell a person's contact information to an advertiser purchasing a list of people with similar characteristics, like homeowners with excellent credit.
A creditor can check a person's credit periodically.
A credit counseling agency, with the client's permission, can obtain a client's credit report with no adverse action.
"Hard" Credit Pulls:
Hard credit inquiries are made by lenders. Lenders, when granted a permissible purpose by a borrower for the purposes of extending his credit, can check his credit history. Hard inquiries from lenders directly affect the borrower's credit score. Keeping credit inquiries to a minimum can help a person's credit rating. A lender may perceive many inquiries on a person's report as a signal that the person is looking for loans and will possibly consider that person a poor credit risk.

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