If you’re worried about your credit score, maybe you should be. Your credit score can have a very serious affect on your life. Any time you apply for any kind of credit, which includes even renting a house or apartment, the first thing the company will do is check your credit score. If you have a very low score of five hundred or less you may have trouble getting credit or if you do, you will probably have to pay a much higher interest rate.
What is a credit score?
Your credit score is an estimate of how creditworthy you are. It is a mathematical representation of your credit history. You are assumed to be more creditworthy if you have a high score (650 or more). When you do, potential lenders are comfortable about loaning you money.
Here’s the credit score range
Between 700 and 850 – Very good or excellent credit score
Between 680 and 699 – Good credit score
Between 620 and 679 – Average or OK score
Between 580 and 619 – Low credit score
Between 500 and 579 – Poor credit score
Between 300 and 499 – Bad credit score
How your credit score is calculated
Your credit score is calculated based on factors that include missed payments, late payments, how long you’ve had a credit history, how many times you’ve applied for credit and negatives such as bankruptcies and charge offs. The formula for calculating the credit score was developed by the company FICO, which used to be known as the Fair Isaac Corporation.
There is no free FICO credit score
Unfortunately, there is no way to get your FICO score absolutely free. What you can do is go to the site www.myfico.com and sign up for a free ten-day trial of its Score Watch service. You will probably want to cancel before the end of your free trial, or you will be billed for three months at $14.95 a month or a total of $44.85.
How to estimate your credit score
There are websites where you can do a free estimate of your credit score. One of these is Credit.com. In the case of Credit.com, you will be required to provide information including whether you’ve had a credit card or loan within the last six months, your total credit limit, the number of times you applied for credit within the last year, the times you missed a payment on any of your credit accounts and if you’ve had any negative events such as a bankruptcy, foreclosure, repossession property, tax lien, etc. After you provide this information, all you do is click on Submit and you will get your estimated credit score.
What to do if you have a low estimated credit score
If you find you have a low estimated credit score, there’s not a lot you can do about it quickly. You should get your credit reports from the three credit reporting service – Experian, TransUnion and Equifax. You can get all three reports free once a year on the website www.annualcreditreport.com. If you find any errors in your reports that would have a negative effect on your credit score, you can write a letter to the appropriate credit service and ask to have information removed from your credit file. You will have to have proof that the information was erroneous in order to get it removed.
There are reasons to worry about having a good credit score – such as when you want to buy a home or car. There are also times when you will want to put your credit score concerns on the back burner if you are in a serious financial crisis. If you can barely keep up with the minimum payments and are charging gas, groceries, and everyday living expenses to your credit cards then you may want to worry more about getting out of debt than your credit scores.