Credit scores are really a big concern in one’s financial world. Thousands, or even millions, of people are concerned about it because it’s connected to so many aspects – cars, houses, jobs, credit cards, and so on. But before we get deeper into the subject, as a consumer, you should first have a basic understanding of credit scores.
1. A credit score is like your overall grade that quickly tells lenders how well you are handling your financial obligations. It indicates how good or bad a credit risk you are.
2. Your credit score is sometimes called a FICO score because it is named after Fair Isaac Company, the company responsible for the software in tabulating your credit score. Although, it is important to note that today, the major credit bureaus do not necessarily use the same software in calculating your credit score.
3. Credit bureaus are agencies that put together your credit score. Of the hundreds that exist in the country, only three are the ones you should be concerned about – TransUnion, Equifax and Experian. These three major credit bureaus put together your credit score according to the data they gather from their client companies (such as credit companies and utility companies). They do this by using a software that calculates your credit scores.
4. Therefore, you have three credit scores from three different credit bureaus. Your credit scores may vary, because they use different softwares to calculate your credit scores. That means you have three credit reports, coming from three different credit bureaus.
5. Credit scores range from 350 to 850. Typically a score above 720 is a good score, which can qualify you for better interest rates, loans, mortgage rates, auto loan premiums and credit cards. The lower your credit score, the harder it is to get these types of things with good rates.
But you should not be discouraged with your low score. You can still show lenders positive things that are not stated in your credit report, such as that high-paying job you just got in the past months, which may help you get approved by lenders.
6. Under the FCRA (Fair Credit Reporting Act), you are qualified to get a copy of each of your credit report for free every 12 months at your request. You may get them all at once, or you may get them one at a time, if you wish.
7. You are also qualified to get a copy of your credit report for free if you were turned down for credit or loan, do not get a job you apply for, are on welfare, are unemployed and will look for a job within 60 days, or if your credit report contains inaccurate negative information.
8. Your credit score is very important in your financial life because it tells lenders whether or not they should extend you credit or loans. Employers may also use it to accept you for a job, and landlords may also use it to know if they should let you stay in their apartment.