Credit Scores - Determining Your CreditWorthiness

(June 24th, 2007)

These days, it's not just loan lenders that check your Credit Score. Employers look at their potential employees' credit scores in the pre-screening process. Even landlords and insurance companies have got in the habit of checking Credit scores of their potential customers. If you have a low credit score, you are considered a high risk to lenders and have lesser chances of being granted credit. If you are indeed granted credit, you will have to pay higher fees, higher interest rates, etc.

Apart from your credit score, lenders also look at your annual income, length of employment with your current employer, # of years you have lived at your current residence and the amount of debt you carry. It is actually thought that that 1 credit Score has made the entire concept of Credit Reports useless. Rather than analyzing the long and complicated Credit Report entries, lenders will simply look at your credit score and rate you on a scale from R0 to R9. More can be read about this rating at Importance of Your Credit Score (

The factors that mean most to your credit score is your public records - any judgements against you, liens and any bankruptcies you have declared.

Checking Your Credit Score

Check your credit score 6 months before you apply for a big principal loan. If your credit score is low or medium, atleast this gives you 6 months of time whereby you can improve your credit score. Read this article for more analysis on this: How to Improve Your Credit Score - 4 Basic Things

Check your credit score a few days before applying for your loan as well, and print out these results. This is because when the lender checks your credit score upon your loan application, the # he gets may be slightly different. This is OK because some lenders will print out a different version of the FICO score or industry specific FICO score. However, this # should be very close to the Credit Score that you received.

Glinda Bridgforth, author of Girl, Get Your Credit Straight! quotes, "It's important to be patient with the process when it comes to increasing your credit score. Once you've fixed all errors, are paying your bills on time, reducing balances by paying more than the minimum payments and lowering interest rates as much as possible, be patient and let time work to your benefit. I know it can feel like you're watching grass grow, but if you're consistent with following these healthy habits, your credit score will definitely increase and you'll be well on your way to getting your credit straight."

Components of Your Credit Score?

The 5 components that make up your Credit Score include:

  1. Previous Credit payments & performance history
  2. Current debt load
  3. Your past average credit length or history
  4. Types of credit available to you
  5. Your applications for new credit

In the graph below, we summarize the importance of each of these items in percentage format, with the total being 100%