Question:How does my credit score work?

Your credit score is a formula that all lenders use when considering lending money. This is also known as your FICO score. The name comes from Fair, Isaac and Company that developed the formula in 1958.

Debtors don't have a single credit score as there are three different companies that generate credit scores for all consumers. These are Equifax, Experian and TransUnion. Federal law requires these companies to provide a copy of this report to all consumers at no charge. You can request one of these free reports only once per year.

• 30% How much existing debt you already have.
• 30% Your existing debt payment history.
• 15% The length of your credit history.
• 12% How much new credit you have been requesting.
• 13% What kind of debts you're carrying.

Generally a credit score of over 700 is considered great.

• 730 - 850 Excellent
• 700 - 729 Great
• 670 - 699 Good
• 585 - 669 Average
• 300 - 584 Poor

Here are 5 tips on managing and improving your credit score.

1. Request a report from one agency once every four months. You could also request all three at the same time but my method will help you catch errors sooner.
2. Pay all your bills on time will improve your score over time.
3. Try to keep a low balance on credit cards and other high interest debt.
4. Don't request credit you don't need as creditors are watching how many companies you requested credit from.
5. Canceling credit cards can actually hurt your credit score if these are older credit cards. If you're going to cancel a credit card be sure that it's the most recent.