FICO Score

FICO score is a credit score given to individuals which determines the likelihood that a borrower will pay his or hers bills. Fair Isaac and Co. developed the credit score method as a way to let lenders know if one is worthy of credit. A good FICO score will also get you a better rate on your loan.

It helps evaluate ones credit history into one score by using mathematical formulas to determine the score. The top 3 credit agencies may use a different method, but for the most part they are consistent. As a borrower you want to always maintain a good credit standing. It can determine whether one will be eligible for a loan to buy a house, car or any form of credit.

Factors that can damage your credit score include:

Late Payments

Bankruptcies

Collections

Negative credit information or non-payment to other accounts

Partial payments

Too many credit cards with huge balances

Buying a big ticket item

Some of these can be quite serious if not addressed immediately. The top three credit reporting agencies are; Experian, Trans Union and Equifax. All three can report their own FICO score. A lender may choose one or the other or perhaps the score that falls in the middle to evaluate your potential as a good creditor.

Factors that can help increase your score over time:

Pay your bills on time

Don’t close or cancel your credit cards

Maintain a low balance

Pay well above the minimum required each month

Don't apply for every card offered to you

Stay away from department stores since they will offer you a 10% discount if you apply for their card. That 10% discount can end up costing you a lot more in the long run if you don't pay right away. You're better off waiting for the Sunday circular and clip the one-day sales coupon such as Macy's. Remember to pay those department store credit cards off every month though. There's nothing worse than paying high interest rates of 21% on department store credit cards.

You are eligible to for a free credit report once a year, click here to visit http://www.freecreditreport.com.

Be careful though, they may offer a free report, but you may have to fill out some credit card information first. Then they'll monitor your credit for a monthly fee. I don't think that is necessary, but just read everything carefully before you request a report.