A consumer's credit score is based on a statistical analysis of a person's credit record and is meant to assess their credit risk. A credit score is primarily based on information gleamed from one of the three main credit bureaus. Lenders use credit scores to determine whether or not you should qualify for a loan, at what interest rate, and what your credit limit should be.

The primary score out there within industry and available to consumers is the FICO score. You can get your FICO Score Here. This site links to FairIsaac's site, which is the developer of the FICO score.

Even though utilization of FICO scores by mortgage underwriters (the ones that even bothered to check creditworthiness or verify income) proved to be inadequate in assessing default risk, it is still the most widely utilized tool out there for lenders and borrowers alike.

Why FICO Matters

I recently had my credit run during my new car purchase activities. I was pleased to hear that my credit was over 800, so I qualified for the optimal .9% financing terms. However, just like the cost of credit to corporations increases with a decreasing credit rating, it does for consumers as well. If my FICO score were lower, I'd be paying possible 5% or higher for the same loan.

• Employers check your credit as part of the new hire verification process
• With interest rates dropping like they are now, you'll possibly want to refinance in 2009. A low FICO will guarantee you the best rate.

Some things to do to improve your FICO score include:

• Increasing your credit limit, believe it or not, since this will decrease the ratio of amount owed.
• Leave old accounts open - closing accounts hurts your score; again, counter intuitive. If you must close accounts, close the newest ones first since old open accounts reflect favorably.
• Reduce revolving debts (obvious)
• Limit credit inquires. Even a call to your cable company or cell phone signup triggers an inquiry. Use sparingly.
• Don't open too many accounts in a short period of time.
  
  
  To start off the new year, you should consider spending the few minutes to line up your analysis and This Service will even notify you when your score changes!
  
  
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