credit score is a number that helps creditors decide whether to grant you credit. You can improve your score if you improve your credit management. When you manage your credit responsibly, your credit score goes up over time. A strong credit history will give you a strong credit score.

Credit scoring is a statistically based computerized method for predicting how likely it is that a borrower will pay back a loan before it's even issued. Each credit bureau calculates your credit score differently which is why your score may vary among different bureau credit reports.

Several factors are considered when calculating a credit score.Various credit scoring companies use different methods and scoring systems. Credit scoring is a method for calculating risk, and gives creditors a way to predict how well you will manage your debt based on your credit report.

Know what's on your credit report. Ask your lender for your credit score, and make sure it's explained to you in detail. You can improve your credit score by managing your credit responsibly over time.

Credit reports from millions of borrowers are compared to each other using a computer program that considers similarities between the reports and whether the borrowers paid some or all of their bills on time. The program puts the reports in rank order, giving each a score - like a grade on a test.

Predictive variables are categories for predicting risk. Your credit score is calculated based on these variables. By looking at your credit score, the creditor can figure out how much risk is involved with loaning you money. The score gives the creditor a way to predict how well you will manage your debt.

Consumers with credit scores between 620 and 639 can expect to pay 7.09% interest on a $150,000, 30-year fixed mortgage as opposed to 5.51% for someone with a credit score of 760 or higher. A score lower than 620 will get you an even more expensive "sub-prime" loan. (Orange County Register, 10/17/05.)

No credit score lasts forever. It changes over time as your credit behavior changes. Think of it as a snapshot of your credit performance at one point in time. Your score can go up or down depending on how you manage your credit.

The credit score, which is based entirely on the credit report, is the creditor's most powerful tool for assessing credit risk. To make sure you score high with your credit history, it's important to understand what factors affect your credit score.

Different types of information, known as factors, are gathered from your credit report to make up your credit score. These factors fall into broad categories, such as payment history and outstanding debt.

Credit scoring models rate the importance of each category to calculate your credit score.

Credit scores reflect credit patterns over time. An adverse action, like a tax lien or bankruptcy filing, can immediately and significantly impact a credit score.

Several factors can have a negative impact on your credit score:

• History of nonpayment
• Public record information
• Evidence of collection accounts
• Recent delinquent accounts
• High balances owed on accounts
• Credit cards charged to their limits
• Too many new accounts

Only the applicant's prior credit history is considered when calculating a credit score. For this reason, credit scoring is considered unbiased. Any factors that would show bias are not allowed.

Your credit score cannot be based on any of these factors: race, gender, age, income level, national origin, sources of income, religion or marital status.

Because income level is not a factor, you could have a low income and a high credit score; or, you could have a high income and a low credit score. It just depends on your credit history.

FICO® scores, developed by Fair, Isaac and Co., Inc., are the most commonly used credit scores today. According to FICO, the various factors used to calculate credit scores can be grouped into five primary areas:

1. Payment history
2. Outstanding debt
3. How long you have been using credit
4. Pursuit of new credit
5. Types of credit in use

FICO is one credit scoring company. Other companies may use different factors.

Five sample factors for calculating credit scores are listed below, along with a sample of the importance each factor has to the total score. As you read through the list, think about how your credit might score today.

What is your track record? Have you made your payments on time?

How much do you owe? Do you have a high level of debt? Are you near the credit limit on some or all of your accounts?

What is the length of your credit history? Has it only been a few years? The longer your credit history, the better.

Have you made numerous applications for new credit? Are you taking on too much debt?

Do you use a variety of credit types? The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. It is NOT necessary to have one of each, nor is it a good idea to open credit accounts you do not intend to use. (Freddie Mac, 2002)

Each factor is given a weight or level of importance. This weight is assigned as a percentage (such as 35%, as shown in the example above). The score is graded for each factor, and then each factor is multiplied by the weight.Computers calculate credit scores in an instant.

Consumers have a right to know the specific reasons why an application for credit is rejected. Mortgage lenders are required to disclose an applicant's score upon request. You can also purchase your score from Equifax, Experian or Trans Union. Of course, as a member of Our Smart Credit Report®, you already have access to your score.

Raising your credit score, like improving your credit history, takes time and responsible credit behavior. Creditors look for stability in your credit history. Our Smart Credit Report® also provides you tools you can use to help improve your credit and credit score. Erratic behavior, such as sudden increases in debts or many applications for new credit, can lower your credit score.

A study by Providian estimated that consumers could save an average of $76.00 a year in credit card finance charges by raising their score 30 points. (Orange County Register, 10/18/05.)

There are things you can do to make a difference. You can improve your credit score by:

Check your credit report for accuracy. Report any errors immediately. As a member of Our Smart Credit Report®, you can directly correspond with your creditors to report any errors and request their correction.

Pay off all collection accounts. Remember that negative credit information can stay on your credit report for 7 years and bankruptcies for 10 years.

Pay your bills on time. If you missed a payment recently, bring the account current. Don't be late again.

• Keep your credit card balances low.
• Don't have too many credit cards.
• Don't open several new credit accounts just to increase your available credit.
• Make more than the minimum payment.
• If you're trying to establish credit, don't open too many accounts at once.

• Pay off debt rather than moving it around from account to account. Your credit history shouldn't look like a seesaw. Stability is key.
• Don't close unused credit cards as a short-term strategy to raise your score. Closing an account doesn't make it disappear from your credit report.