The basics of personal finance include a general understanding of credit scores, FICO scores, and how the numbers may impact your life. Unfortunately, many folks don’t learn about the importance of credit scores until they are declined for credit. If you need credit counseling, it is available. In the meanwhile, here’s your chance to get ahead in the game.
A credit score is a three-digit number which represents the likelihood that debts will be repaid in full. (Your credit-worthiness.) The number can be found on your credit report and ranges from 330 to 850. 720 or higher is considered to be a good score. The higher your number, the less of a risk that you are to lenders. Simply stated, this means that a higher score will equate to better interest rates and credit limits than what you may receive with a lower score. Really low credit scores may get you denied for any credit…or even insurance.
Lenders no longer have to rely on subjective judgement to determine who they feel would pay back a loan. Although your score may vary between credit reporting agencies; scoring models today are less biased, and based upon historical data. When calculating your credit score, most agencies will take at least the following references into consideration:
You can find your credit score by inquiring at any of the three major credit reporting agencies: Experian, TransUnion, and Equifax. Each of these agencies offers a free copy of your annual credit report. You can also find your score in other places such as credit.com, freescoreonline.com, creditkarma.com and freecreditreport.com. Keep in mind that joint credit accounts affect your personal credit score. In addition, it’s important to note that many of the credit scores are going to be slightly different than your FICO scores. There is a growing number of financial institutions that will who you your FICO score for free if you hold certain credit accounts. (Discover, Capital One, American Express, Chase, etc.)
You may notice a discrepancy between a banks FICO score and the online credit scores found on Experian, TransUnion, and Equifax. This is because there are different scoring systems used. Lenders can decide which combination of the major credit reporting agencies they prefer to use. If you are going to apply for a loan, know that it’s your FICO score that matters most to lenders.
If you have no established credit, or poor credit, your FICO score doesn’t have to be the end of the road. There are ways to build good credit score, or possibly secure a loan through an alternative lender. Ask an attorney at Debt Advisors for more information about your credit report, the 720 credit score program, or obtaining a loan after bankruptcy.