The credit score is a number that can greatly influence the decision of lending agencies and creditors. A person’s credit score, which is a simple three-digit number, can determine if that person is eligible for a loan or not. But who determines the score? The score is computed by FICO (Fair Isaac and Company), a private company engaged by the country’s major credit bureaus. Until now, the exact scoring method created by FICO is still confidential but here is a rough calculation of the factors that affect the credit score.
About 35% of the score is affected by the payment history; 30% is affected by the outstanding debt; 15% is affected by how long credit has been established; 10% is affected by the credit report inquiries made; and 10% is affected by the types of credit utilized. If one of these factors does not provide sufficient information, such as the case of a young adult who is just starting out, the other factors will exert greater influence. With all these factors in mind, how then can a person obtain a good credit score?