Understanding Your Credit Score
You might be surprised to learn exactly what your credit score reveals about you, and how much influence it will have with lenders who are deciding whether to give you the money to buy a home or car, or take out a line of credit. If you are one of the millions of people who have received a mail offer from a credit card company saying you have been pre approved for one of their cards, it means that they have reviewed your credit numbers and decided that you are an acceptable risk.
Why You Need A Good Credit Score
Having a good score will qualify you for low mortgage and credit card interest rates, low insurance premiums, and may even be the difference in your being offered or turned down for a job. Your credit rating will be mathematically determined from a number of factors, including how much you have borrowed against your available credit lines, and how consistent you are in meeting your payments on time.
If you intend to apply for a new loan, insurance, or a job in the near future, you should probably request your credit number from the three credit reporting agencies, Equifax, Experian, and TransUnion. If you know you have a good credit rank you can try to negotiate a favorable interest rate or avoid insurance companies which seem to be charging excessive premiums.
Credit Score Ranges
Your credit rating will be anywhere from 300 to 850, and the three major credit reporting agencies use the FICO standard, developed by Fair, Isaacs, & Co., to determine yours. The vast majority of scores fall in the 600 to 800 range and the greater your score, the more ease you will have in getting additional low interest credit. Those whose scores exceed 700 will get the best rates of all.
Your credit number will reflect your payment history the total of what you owe the amount of your remaining credit, the number of your pending loan applications, and the types of loans you have, including your mortgage, car payments, credit cards, and installment payments. While the information on your credit history, as well as the details of the scoring methods, may vary at the three credit reporting agencies, your score at each of them will probably be fairly close. If one of them is noticeably higher or lower, you should request a free credit report and look for errors.
The credit reporting agencies, until somewhat recently, would not tell individuals their credit ratings because they believed the mathematics involved were too complex. But now more and more people are getting their scores so that they can determine the best ways to improve them. If you think you will need to apply for a loan in the future, your best chance of getting it, and at the most favorable terms possible, is to get your score now, and do as much as you can to raise it before you look for your loan.
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