![]() Having a good credit score can unlock a lot of doors for you, especially when it comes to your finances. ![]() Showing that you can manage both installment loans and credit cards can help increase your credit score. New credit applications typically require a hard credit check, which can drop your credit score between one and five points for up to one year. Avoid applying for new credit unless you really need it. Keeping old credit cards open can help you establish a longer credit history, which creditors like to see. Keeping your credit balances low relative to your credit limit (i.e., having a low credit utilization ratio) will help your credit score. This refers to how much you owe, both on loans and through your credit cards. Even a single missed payment can damage your score. The biggest single thing you can do to help your credit score is to make all of your payments on time. Your FICO Score 8 is made up of these five components: ![]() There are many general-use versions of your credit score available in addition to industry-specific ones for auto loans, credit cards and mortgages. How the FICO Score 8 WorksĪll of your FICO scores are calculated in the same way: FICO takes a credit report from one of the three credit bureaus-Equifax, Experian or TransUnion-and runs it through an algorithm. ![]() Here’s what you need to know about how the FICO Score 8 works. It was introduced by the Fair Isaac Corporation (FICO) in 2009 as an improvement over previous versions. You’re probably already aware that you have a credit score, but did you know you have more than one? However, the FICO Score 8 is the most common. ![]()
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