What is my Credit Score and what does it mean to me?

So you think you're pretty spot on about your credit and credit cards. You know how to apply and how to compare to find the best deal for your needs. You understand the difference between cashback credit cards and rewards, and even know that your credit score is used by companies to determine whether or not to approve your application. But have you ever wondered how the different companies come up with your credit score? Knowing how your score is determined can help you get your report in shape and keep it in shape so that next time you make an application, you'll get the best rate possible.

In a nutshell, your credit score is a numerical rating that compares you with the 'ideal applicant' - one who will use the credit cards and make their payments on time. The consumer credit company will take your history and background and assign points to each item in their list of behaviours and characteristics. The closer you are to their ideal customer, the higher your score will be. While there are many different systems for coming up with a score, most look at the following items when making your applications.

Do you pay your bills on time?
The past reflects the future, says conventional wisdom. If you've always paid your bills on time, you'll keep on doing that. For the best credit score when you apply for finance, your history should show no late payments at all. If there are two or more that are over 60 days overdue, your credit score will drop significantly. Other things that will affect it adversely are charged off debts, bankruptcies and CCJs.

How much money do you currently owe?
Most scoring systems will look at how much you owe in comparison to how much available credit you have. If you owe close to your limit, it will lower your score. In other words, if you've nearly maxed out all your cards, it's not good for your score.

How long have you been paying bills?
The longer you've had borrowings in your own name, the more points you'll get in this part of your score - assuming that your credit has been generally good. People who have never borrowed before suffer on this one. That's why it's a good idea to get a credit card when you're young and keep it in good standing.

Are you applying for a lot of credit?
If you've made lots of applications for different types of finance recently, it could affect your credit score adversely. Creditors may feel that you're trying to borrow more to bail yourself out of financial trouble.

How many credit cards do you have?
There's no 'ideal' number of cards to have, but most lending companies agree that a whole wallet full is too many. If you're carrying more than three, it could lower your credit score.

Other factors that affect your credit score are your job, how long you're worked there, how much money you make, whether you're a homeowner or a tenant and how long you've lived there. The more 'stable' you appear to be, the higher your score will be.

Knowing your credit score can help you decide which credit card is the best for you. You can easily compare different products online at www.moneyeverything.com and apply online.