What Is a Credit Score?
What is a credit score? In the US credit score is a number that reflects your creditworthiness. This number is meant to show the likelihood that you will pay off your debts. Your credit score is calculated by credit bureaus. It is based on your credit history, your income and many other factors.
There are several types of credit score used in the United States, but the most popular one is FICO. It was developed by Fair Isaac Corporation and is widely used by credit bureaus, banks and loan centers.
Financial institutions use an approximate scale that shows how likely a potential borrower is to default on a loan or to declare bankruptcy. They request the information from one of the credit bureaus. Each credit bureau has its own way of calculating credit score.
When calculating your credit score, credit bureaus analyze all kinds of personal and financial information. There are different methods of computing your suitability for different kinds of loans - consumer credit, automobile loans or mortgages. So your "credit card score" might be different from your "mortgage score" or "auto loan score".
Credit bureaus consider how well you have been paying your bills including rent and cell-phone bills. But, of course, the crucial factor is how well you manage your credit. All the information on your monthly mortgage payments are reflected in your credit report.
The way you handle your credit cards is also very important. For example, it is not wise to use your entire credit limit because the bigger your available credit is the better it is for your credit report.
How Can I Get My Credit Score?
How important is it to maintain a good credit score? Creditors usually closely consider your credit report because this is how they can evaluate your eligibility for their credit products.
If you have good credit, you are likely to be approved for the best deals. The best credit card offers such as rewards credit cards, fee free cards, and low rate deals are issued to those whose credit history is good or excellent.
Consumers with bad credit are approved for secured credit cards or unsecured deals with higher fees, rates and very limited number of bonuses.
Banks do not issue credit cards with rewards for those with low credit score. If you are applying for a mortgage or car loan, chances are your application will be rejected.
Every American is entitled to a free credit report from all of the credit bureaus. It is very important to monitor your credit history to make sure it contains no erroneous information. If there is a discrepancy you should analyze the problem. Of course, it could simply be a human error. However, it can also mean that you have been a victim of credit fraud.
If you have noticed something suspicious on your credit report, you should immediately contact the credit bureau. Remember that negative information on your credit report may lower your chances of being approved for a loan or a credit card.
Although you have a right to get a free credit report once a year, it is highly recommended to check your credit score more often.
What is the scale that lenders use to determine your credit eligibility? If you want to be considered for top credit offers your FICO score should be over 750 points. Those with credit score about 660-750 will be approved for deals for good credit. Credit products for fair credit require you to have 620-660 FICO points. Consumers whose credit score is lower than 620 are eligible only for bad credit offers.
The lower your score is the less likely you are to be approved for a mortgage or any other type of credit. Your credit history also influences your car insurance premiums and even promotion chances in some companies. So it is obvious that if your credit history leaves much to be desired something should be done about it.
The best way to establish credit is to apply for secured credit cards, store cards or credit cards for no credit. Your credit limit will be rather small but you should keep in mind that those cards are for building credit history, not for borrowing money.
Consumers with bad credit score can also improve credit by applying for a plastic for those with bad credit rating. Make your payments on time and you will surely rebuild your credit. Just make sure you qualify for the deals you are applying for - a rejection might hurt your credit score even more. At Free-Credit-Reports.com we have collected all the information you need to know about credit score. Request your free credit report online and apply for credit cards you are eligible for!
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