Understanding Your Credit Score
If you have applied for credit in the past you may have been told that
your credit score is a three digit number, yet you may not have understood what
the number was or even what it should mean to you. Your credit score,
also known as a FICO score, will range from 300 to 850, and it is your credit rating.
In other words, the higher your score the better your rating and the
better your rating the more likely you will be approved for credit, a loan,
insurance, or even a job.
What you may not know about your credit
score is that you have three of them, one for each credit bureau. The
score that each bureau gives you is their prediction of how likely you are to
pay your bills or repay credit that is extended to you. Obviously, the higher
your number the more appealing you are to a lender that is considering lending
to you, and the higher the number the lower your interest rate will be, as
this makes financing more affordable.
Your credit score is obtained
by many different creditors who never even look at your actual credit report.
There are many different financing offerings out there that will give you
an instant approval, and with these programs they are going completely off of
your scores and not your full credit report. While there are a lot of companies
that just use the score, there are also those that spend a lot of time
looking at your credit report in addition to all of the other information that
you are able to supply them in the way of reference letters, employment, and finances.
How
do you get your credit score? Basically you are given
points when you pay your bills, repay extensions of credit, etc and you lose
points when you don't pay your bills on time. Everything you do in reference
to paying bills can and likely will be reported to the credit bureaus, so
you should focus on paying those bills and make timely payments as in the long
run this all impacts your credit worthiness. Your credit score should always
be a three digit number, but when you understand your credit score and you
know where it comes from, hopefully you will be able to work toward having it
be at the higher end instead of the lower end of the spectrum.
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