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Understand Your Credit Score

By Ruth Racey
Published: Tuesday, December 15th, 2009

One of the most important scores that you have to pay attention to, especially when you are already an adult and regularly uses credit cards in your expenditures, is your credit score. In fact, this score actually says a lot, on whether you are still in a good and stable financial condition or of you are already going bankrupt. In addition, your score will also determine on whether you are able to get and secure future financial loans or not. Generally, your credit score is the score on which lenders will primarily consult, especially when they are deciding to lend you money or not. Sad to say, many people still misunderstand their respective scores, only to find out that they in fact are already bankrupt in the end of the day.

When you want to become more financially stable, as well as become a better financial manager in your finances, it is important for you to understand what your credit score is all about. Basically, your score is a rating of how creditworthy you are. The score that is given to you is actually the one derived by the Fair Isaac Corporation. This is also the reason why it is also called your FICO score. Your FICO scores are actually determined by proprietary algorithms, based on the values that are present in your credit report.

The better the numerical derivative from the data of your credit report, the better will be your FICO score. Likewise, the lower the numerical derivative derived from the data of your credit report, the lower your FICO score. These scores are actually given in ranges; the lowest being 300, and the highest being 850. Before, whenever lending agencies see that you have a score of 700 and higher, you are already seen as a good creditor, for it is already seen as an excellent score. However, due to the credit crunch that the US economy has experienced, lending agencies have raised their standard, raising it up to 760.

Whenever lenders are deciding to lend money to consumers, they will first set what score they would require as a benchmark. Therefore, when you want to be sure, it is still wise for you to aim for the highest credit score as possible. The higher your score, the more likely that your loan will be approved, while having it in low interest rates. However, having low scores would result to high interest rates for your loans, if your loan will ever be approved.

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