The Credit Score Used in Credit Reports Explained

A credit score is a snap shot of your credit risk (ie how likely you are to repay a debt and repay it on time) at a specific point in time. The higher your score, the lower the risk. A credit score is a number indicating your financial risk.

In short, it / 'sa score measuring how likely you are to repay debts, such as loans or lines of credit. A credit score is like the numerical version of your credit report. Credit scoring is the process of using a proprietary mathematical algorithm to create a numerical value that describes an applicants overall creditworthiness.

FICO does offer a package called Score Watch, which is basically a 30-day free trial. When you sign up for Score Watch, you get a free FICO score and credit report. FICO, the most widely known type of credit score, is a credit score developed by Fair Isaac Corporation. It is used by many mortgage lenders that use a risk-based system to determine the possibility that the borrower may default on financial obligations to the mortgage lender.

FICO scores are been used by credit-card companies, auto loan providers and mortgage lenders as part of a process to grant credit for billions in purchases. Often called âFICOsâ these scores incorporate five types of information about a persons finances to calculate a score on a scale of 300 to 850. FICO recognizes 5 different balance tiers: 20, 40, 60, 80, and 100 percent usage.

A good rule of thumb is that if you are applying for a loan in the near future and have the resources to pay your balances under 20 of the limit your scores will be very good.

We cannot stress too much that your credit rating not only measures credit worthiness, or your ability to pay back a loan. It also affects the interest rate applied to loans.

Interest rates vary depending on the risk of the investment. A credit score, also called a credit rating.

It is one of the main keys to a person's financial life. Credit ratings are expressed as a three-digit number, ranging from 350 to 850. A credit rating assesses the credit worthiness of an individual, corporation, or even a whole country. Credit ratings are calculated from financial history and current assets and liabilities.

Check online to see what could affect your credit score. Check out several lenders, ask about their interest rates and loan terms, and find out more about their loan process. Be careful, though, not to submit a flurry of applications in a short period of time as that might affect your credit score.

Checking your credit report is one of the most important things you can do. You can use your credit report to make sure your credit history is correctly recorded before you apply for a big loan or a mortgage.

Check to see if past financial ties (such as bills with ex-partners) have been removed. If a record does have to be amended, make sure it has been changed by ordering another report six weeks later.

Credit score is becoming more and more important to our financial lives as time goes by. Investors, borrowers, issuers and governments may all use opinions from credit rating agencies.

Different lenders use slightly different factors to come up with a credit score for you. Also, the definition and thresholds of a good or acceptable score will vary from one mortgage lender to another.

Different lenders place different weightings on these factors. This explains why some lenders will reject you for a credit card and others will refuse you for a personal loan or mortgage while others are happy to welcome you as a customer.

Information here should not be construed as advice and it is offered without legal responsibility or liability. It must be emphasized that you should consult a professionally qualified individual or company (such as an accountant, financial adviser or solicitor for example) should you need advice on your financial situation, as they will be able to tailor their advice to your personal needs accordingly .

Source by Steve Last

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