Scoring System in Credit Card Deals

Have you ever thought how your bank decides whether you are fit for credit or not? For many-many years credit lenders have been using different systems of scoring in order to prevent the risks with your credit card account. Nowadays lots of different business organizations - such as phone companies - use credit scores to make decisions about you. A higher credit score means you have more chances in new credit card deals - or pay less interest rates. This score ranges from 300 to about 900, with the biggest part of people inside of 600-700 diapason.

As you can see, in the United States a credit score is a three-digit number that is based on credit report analysis. In its turn report's information is absorbed by three leading credit bureaus: Equifax, TransUnion and Experian. The mostly used score in the United States is FICO-rating (Fair Isaac Corp.) while there are frequent uses of NextGen, VantageScore and the CE Score systems.

Credit Score Factors. You may be surprised, but because of copyright problems, exact calculating formulas are closed from the wide publicity. But the Fair Isaac Corporation has revealed some credit score factors that are used for its indexation. Let's observe them:

It stands to reason that one of the key components will be the information about accuracy of past credit payments - this gives about 35% of score number. Almost the same importance - 30% -will be given to the total debt ratio. These are the two most significant factors, together with the general longevity of credit history (15%), types of used credits (10%) (unsecured or secured credit card and other "less" meaning parameters like the data about recent credit requests (10%) et cetera.

Of course the given percentage ratings cannot be used as something precise (par excellence if you wish to make your best credit card deal) For example the length of credit history consists of different indexes, like the date of the very first credit and the length of current credit line. As for accuracy of payments - if the consumer possesses more than one credit line - the total factor rate is higher. Different serious events - ad modum bad debt and bankruptcy - can strongly affect the credit score, but they are not included in the FICO system usually. The same situation is with employment history - it isn't aggregated in the FICO score, but is significant for applying. E.g. an unemployed person will not usually fit for a home mortgage, even if his or her FICO score is high.

Surely there are many other factors which can influence the score. E.g., financial juridical penalties, imposed by judgment. And, even if you have many credit lines, it can be taken as negative, because you are under risk of having constant debt. Moreover - if you suddenly wish to close most of your credit lines - it can also lead to a negative effect.

Some underground of credit report. Beware there is the Fair Credit Report Act, issued by Federal Trade Commission, which describes the rules of requesting credit information both by consumers and any other interested sides. And the amount of credit reports checking, especially if recent, may affect your score largely and negatively and all your credit card deals too.