If you’re not familiar with your credit score, it’s a little three-digit number that follows you throughout your life. It ranges from 350 to 800 and this is one of those cases where more is better. Conversely, you don’t want to have a low credit score of, say, 450 or less.
Why is this?
When you apply for credit, whether it’s for a new credit card, to buy an automobile or to rent an apartment, the first thing the lender will do is look up your credit score. If you have a low credit score, you probably won’t get that credit card or auto loan. Conversely, if you have a score of 700 or better that lender will probably welcome you with open arms.
It’ll cost you more
People who have low credit scores generally pay more for a number of things, including interest on their credit cards, interest on an auto loan or even for life and auto insurance. This is because most insurance companies factor in your credit score when calculating your premium.
Where your score comes from
When a lender checks your credit score it comes from one of three credit reporting bureaus–Experian, TransUnion or Equifax, depending on which service the lender subscribes to. Each of these credit bureaus has its own formula for determining your credit score. But they all have two things in common. First, the credit score will be based on your credit report and second it will be based in part on your FICO score. This score is based on a formula or algorithm initially developed by what was then known as the Fair Isaac Corporation. It’s a way to take analog information–that is your credit report–and convert it into a digital number.
What determines your credit score?
The three credit reporting bureaus keep their formula for computing your credit score a closely guarded secret. However, in general it can be said that your score will be based 35% on your payment history, 30% on how much you currently owe, 15% on how long you’ve had credit, 10% on your application for credit and 10% on the types of credit you are now using. For example, credit cards are generally viewed as a higher form of revolving credit than department store cards. And mortgages are thought of as being better than cards issued by department stores.
The downside of credit scoring
The biggest problem with credit scoring is that it does not take into consideration the human factor. In those good old days before there was such a thing as a FICO score, bank managers and loan officers generally knew their clients and included his or her “character” in making a decision about lending money. However, today the decision is largely automated so it is possible that you could be unfairly represented and required to pay higher lender fees because of scoring models used by the three credit reporting agencies.
How To Get Your FICO score
Since all three credit bureaus base their scores at least in part on your FICO score, you might just as well go to the source–the FICO website at www.myfico.com. You can get your FICO score there free if you sign up for a free 10-day trial of its Score Watch service. Otherwise, you will have to pay $19.95 to get your score but you will also get your TransUnion and Equifax credit reports as part of the deal.
If you have a low credit score
If you have a very low credit score it’s probably because you’re deeply in debt and unable to meet your commitments. If this is the case, our debt relief providers can help. The offer a 100% satisfaction guarantee. This is because we’re so confident that we can help you achieve your goal of becoming debt-free in a reasonable time, that if you are ever unsatisfied with our recommended debt relief programs you can cancel at anytime without any penalties or fees.
Don’t get stuck in a tar pit of debt. Call us now for immediate help.