Last time we explained what your credit score is and what it’s based on. But how is it calculated? From your report, your credit score is calculated.
With that, let’s debunk the first myth: You have only one credit score. False. There are more than a thousand scoring models used in the credit market place. Therefore you could have dozens, even hundreds of different credit scores.
The most widely used scoring scale comes from FICO. The FICO scale ranges from 300 to 850 and the higher your score the better. Anything above 740 is considered excellent while anything below 650 you’ll pay higher rates on loans and credit card interests.
With FICO, every point counts and can make a big difference on how much you can save on interest rates. Money 101 reports, “Someone with a score of 659 could get a 30-year mortgage at 5.3% at today’s rates; if his score was 680 he’d qualify for a loan at just 4.7%. That’s about $950 a year less in interest, or about $28,000 over the life of the loan.”
The exact formula FICO goes by to calculate your score is a well kept secret, but we do have how much each category is weighed available to us. It goes as follows: 35% payment history, 30% amount owed, 15% length of history, 10% new credit, 10% types of credit used.To learn more about how your credit score is calculated, come to the Seton Center’s Credit Cafe Wednesday November 6th from 4:30pm-6pm where we will have Credit Advisors to work with you on improving your score. This is free and open to the public, but you must register. To register contact Lacy Ames at (301)-788-0239 [email protected] or Kelly Overholtzer at (301)-447-6102 x17 [email protected], or visit the Events page on this website.