The ideal credit score has increased during the last year as lenders avoid risky loans and redefine what it means to be a good candidate for a loan.
A person’s credit score is one of the most important factors that lenders look at when offering loans. Credit scores are made up of a combination of payment history, length of credit, new credit applications and more.
Thirty-five percent of a person’s credit score is payment history. Thirty percent of the score is based on the amount of credit the person has and how close they are to their credit limit. This segment of the score can decline when a person is within 30 percent of their credit limit. Another 15 percent of your credit score is based on your length of credit history. Ten percent of a credit score is based on how often someone applies for new credit and another 10 percent is based on the type of credit applied for, such as student loans or department store credit cards.
The FICO credit score ranges from 300 to 900 points. The average acceptable credit score has risen from 700 to 750 in the last year due to the economy and credit card responsiblity acts. This is an indication that credit scores are more important now than ever before and that loans may become difficult to qualify for.
