If you’re concerned about your credit score, one of the first things to do is see where you’re starting from. It’s important to understand that there are many different credit scores and that your actual credit score may vary slightly depending on who pulls it for you. Credit score providers back then were less sophisticated in their scoring algorithms than they are today. Today’s credit cards measure your level of behavior rather than your ability to repay a debt. Understand How much credit score is good?

What is credit? It’s a financial instrument that allows you to borrow money with the promise of being able to pay it back within a given period. The amount you can borrow generally has to be agreed upon between you and the lender you’re dealing with. If you want money quickly, you can use credit cards and overdraft protection on your checking account. Or perhaps your parents have set up an emergency fund for you that can be tapped for cash in an emergency. You can get a loan from a bank if you want to buy oversized items, like a car or a house. Any time your money is in someone else’s hands for them to use as they see fit and then return to you, it’s credit.

 Credit quality includes several factors: your income and assets relative to the debt you are carrying, whether or not your job is permanent, and whether or not you are paying off the debts you’ve incurred responsibly. There is an inverse relationship between credit score and risk of default. A person with lower credit scores generally carries higher interest rates on his credit card than someone with excellent credit history.

Additionally, credit issuers may look at your employment history, the length of your credit history, and the amount of new credit you have acquired recently. They may also look at the number of recent inquiries on your credit reports.

Your score may also be affected by collection actions on accounts you owe money. Late payments will appear on your report and any filed bankruptcy or foreclosure proceedings.

Conclusion.

The higher the score, the lower your interest rates on your car loans and credit cards. Lenders feel more comfortable with people with a high credit history because they are more likely to repay the loan than someone with a low history of paying back their debts. The two most important factors determining your credit scores are payment history and how much debt you’ve accumulated relative to how much you earn each month.