We live in an increasingly automated society and it is no surprise that when you apply for a mortgage, a car loan or a credit card your ability to pay can be reduced to a single number.

Understanding your Fico credit score can be a little difficult to figure out and even confusing. A credit score is a number that helps lenders predict how likely you are to make your payments on time. Each score is based on information in your credit report. Credit scores affect whether you can get credit and what you pay for credit cards, auto loans and mortgages. The higher your score means you are more likely to be approved.

The Fair Isaac Corporation developed Fico scores. It is the most commonly used scoring system in the country. Fico scores range from 300 to 850. Most people are in the 600s and 700s. (The higher the score, the better.)

According to the Consumer Federation of America/Fair Isaac Corporation, there are five components to your Fico scores:
1. Your payment history represents approximately 35 percent of a Fico score
2. How much you owe represents approximately 30 percent of a Fico score
3. Length of your credit history represents approximately 15 percent of a Fico score
4. New credit represents approximately 10 percent of a Fico score
5. Other factors such as having a mix of credit types represent approximately 10 percent of Fico score.
By law, credit scores may not consider your race, color, religion, national origin, sex or and marital status, whether you receive public assistance or exercise any consumer right under the Federal Equal Credit Opportunity Act or the Fair Credit Reporting Act.
There are five top detrimental factors that can affect your credit score:
• Bankruptcies
• Judgments
• Collections
• Past 30 days late payments
•
For those with no late payments: over 80 percent borrowed against your high credit.

Tips regarding your Fico scores: When you get your credit scores, make sure you also learn the highest and lowest scores possible, as well as the most important factors that influence your scores. Secondly, review your credit reports for accuracy. There are a couple of recommended places you can get your credit scores: Equifax- www.equifax.com, 1-800-685-1111, and Transunion, www.transunion.com, 1-800-888-4213.

The best way to improve your credit score is to pay your bills on time and manage your credit wisely. Keep your borrowing below your credit limit. I always inform potential home buyers that their credit is one of their most valuable assets and to keep in mind, “A goal without a plan is just a dream.” Your goals and proper financial planning lead to peace of mind.