When a person goes to a bank or lending institution to have a loan, they check his credit history first. Credit scores tell the story of how regular and punctual you are in making repayments. A person with a good credit score will always gets loan approved quickly, that too with lower interest rates. On other hand, a person with a bad credit history will find it difficult to get the next loan, or he will be offered the loan with high rate of interests.

So, It is always wise to know how to get a good credit score or how to clean up and improve a bad credit score if you have one. For this, you must first know how credit scoring is done. In the US, all credit history is maintained by ‘Fair Isaac Corporation’ or FICO. It gathers loan information from the three biggest credit bureaus namely:
• TransUnion
• Experion
• Equifax
Using this information, FICO will assess a person’s credit worthiness and sends this information to lenders, banks and credit card companies.

If individual consumers so desire, they can get a complete listing of their credit history from FICO. Individuals can use the information thus provided to either apply for new loans based on their credit worthiness or to challenge a particular entry with a lender if they feel it has been wrongly represented. FICO credit scores vary from 300-850, with the lower score indicating bad credit history and therefore a high risk individual. A score of 850 will indicate perfect credit history. Usually the benchmark is kept at 600, with any score above that being considered favorable and below that being deemed poor.

FICO will make assessments based on:
• Payment history
• Amount owed
• Period of credit history
• New credit
• Type of credit
Each factor accounts for 35% of credit score history. For more details on how the scoring is done. once can visit the website dedicated for the purpose.

Any one can become a potential borrower by maintaining a good credit score. He does so, he will be offered with new loans with attractive lower interest rates or high credit card limits. Lending institutions give great value and respect to clients with good credit score. To maintain good credit score, one must be regular and punctual in making loan payments. If he fails to do so, his credit score will go down and will find it hard to get new loans.

Late payment is the main reason for credit scores to go down. The borrowers must be aware of other factors too. Length of credit history accounts for 15% of credit score hence, younger people with fewer loans will have a better credit score. Avoid losing old accounts periodically to boost credit score. For example, if you are not using one of the credit cards you have, don’t close it. Lenders can view it as a longstanding credit history. More credit inquiries lead to low credit score, because the lenders may feel that you spend money aimlessly.

However, frequently request your credit history report to ensure there are no discrepancies or identity theft, which is a common problem for credit card users. Those who have major debt problems file for bankruptcy, hoping to make a fresh start. Remember that bankruptcy filing can lower credit scores by as much as 220 points besides being on your credit history for at least 10 years. If you find that your credit report is unfavorable, do not despair, for FICO scoring recognizes and rewards good behavior – i.e. recent timely loan repayments – and will offset bad previous history.

Apart from timely loan repayments, there are a few other ways to clean up and improve poor credit scores. One is to contest wrong information by appealing to the credit bureau. They in turn will ask for proof from the credit company and if they cannot provide this in 30 days, the entry will be removed from your credit history. Credit reports are automatically updated every 7 years. Cleaning it up with perseverance and penance can get you a good credit score and therefore secure you new loans at attractive terms.

Article by David Livingston of EQuote, who is a specialist in everything life insurance. For more information on instant term life insurance and term life insurance, visit his site today.