Understanding how a credit score is figured is necessary if I wanted to bump my credit score. In the late 1950’s a company called Fair Isaac thought up a formula for rating consumers’ ability and potential to properly handle credit.

This formula calculates what we know as a credit rating or credit score. The three digit number gives potential creditors and lenders a pretty accurate idea whether you are a good credit risk or a bad one.

A credit score or rating will determine if you can get a loan or line of credit and what your interest rate will be.

The credit rating shows everything you’ve done in your life as pertaining to credit and how you pay your bills. The Fair Isaac Company (FICO) pulls all this information together and puts it into a huge mathematical algorithm which then spits out your credit score.

FICO keeps the algorithm secret and copyrighted so they can charge for it. They apply this formula to the information given them by the three major credit bureaus and give back the credit score, for a price.

Today Americans average a credit score of 676. The scale is anywhere between 350 and about 900, depending on who you ask. The higher the better and you have a better chance to get credit and pay lower interest rates.

There are a lot of people below average and once you get to the lower 600’s you’re what is called a credit risk. Creditors and lenders aren’t going to take a chance on you, unless they can charge high interest rates and have a lot of collateral.

If you have a personal relationship with a lender like at a local credit union or bank, they may be able to take into account medical bills due to an accident or other extenuating circumstances.

Talk with them and explain situations. Get them additional documentation and be upfront and honest with them. They could still approve you even with low credit scores. Your credit score is a direct reflection on you, so monitor it and make sure it’s accurate.

I found the best way to bump my credit score is to keep my eye on it. Finding errors and simple mistakes will let me bump my credit score when I see it start to dip.

The best way to keep your score and rating as high as possible is to pay your bills on time, keep your debt at 30% or less of your available credit and only buy those things you absolutely need, but can’t pay for with cash. I check my score at least twice a year. If I ever apply for credit I’ll check my report again, just to keep an eye out for simple errors.

It can be tough to realize that your whole financial background can be summed up in a three digit number. The truth is, though, in the world of credit the scores determine who gets the credit.

I found that a 675 score would qualify me for a home loan, car loan, credit card or signature loan. If I could bump my credit score above that I saw interest rates on my loans go down. It cost me less to borrow the money if I had a higher score.

For free insider tips on what methods I used to bump my credit score check out my website. David S Gibson has been in the mortgage industry for 10 years. He counsels people every day about their credit and how to get their score where they want it. If you liked the article and want more information visit David’s website, http://www.killercreditsolutions.com