If you are looking to buy a home, car or any major appliance and you are applying for credit, lenders are very interested in checking out your credit report to verify your credit worthiness. The most important thing these days that they look at is your FICO score. Most people have absolutely no idea what a FICO score is and usually are trying to find a definition of this term. When a credit report is generated for something like, for example, a new car, a score is generated when it is submitted. There are many ways that a score is generated. This includes whether your accounts such as credit cards, loans and other credit items are paid on a timely basis. Once the credit score is generated, it displays on the merchant's computer screen and can be printed out. Scores vary from a low of about 300 to a much higher level over 800.

A study was conducted to determine the relationship of credit scores and general paying habits. It was found that people with scores beyond 680 generally made timely payments with very few, if any, late payments. It was also discovered in this study that people who scored below the 600 level were much more of a risk and likely to run into payment difficulty. Due to this study, a greater probability of accuracy was engendered when approving, for example, real estate or automobile loans. It is now the 21st century and approving credit has become almost instantaneous. The computer, on line, has been able to generate approvals or denials of credit in almost all areas where credit is involved within seconds to a minute or two. In short, lower credit scores require a more thorough review than higher scores. Often, mortgage lenders will not even consider a score below 600. Items that determine your FICO score include but are not limited to the following:

Late Payments.

To much "new" credit activity within a twelve month period (recent).

Limited credit experience.

Maxing out on credit cards or other revolving credit.

Judgments, bankruptcy or tax liens not satisfied.

Zero balances on credit cards or revolving credit of any type. Credit inquiries that are too numerous. Not enough credit cards on record.

Revolving credit in excess of average consumer usage. The definition of the word FICO is Fair Isaac and Company. TRW, a company of the past was taken over by Experian. Experian uses this FICO method exclusively. Other companies such as Equifax and Trans-Union also use a scoring system.

Michael Russell Your Independent guide to Credit Reports