Your Credit Score

Your credit score will determine the future of your lending in today’s world.  Most lenders will base their decision of your loan and interest rate on the credit score that you have.   No matter what you are buying, your credit score will affect the deal you will get.


Credit Score


Credit Score is simply a number that helps creditors decide whether to extend credit to you and what rate of interest to charge you. The level of risk involved is determined by the number in your credit score presented. With a high credit score, creditors will view your loan as low risk.  The credit bureau score is one of the most respected credit scores. The credit bureau score is based on the information enclosed in your consumer credit reports. Most credit scores are based on calculations by Fair, Isaac and Company.


How will a good credit score help?


It gives lenders a quick and easy way to determine your probability of repayment. Before credit scoring, the task of obtaining a loan was slow and cumbersome, and often relied on the judgment of the person making the decision. Since credit scores have become widely used, loan processing has become quicker, fairer, and has had an effect on standardizing rates. Not all lenders however, base credit decisions solely on your FICO score. Many consider other criteria like job time, residence time, down payment and other factors to determine whether or not to extend credit.


Good score

Scores can be as low as 400s to well past 800. Higher scores mean good credit and are the ticket to most benefits that come with a good score. Majority of lenders consider 620 the break point for deciding the status of the loan. This will determine whether your loan will be considered a regular loan versus a "sub prime" or higher-risk loan. Some lenders will not extend credit to people with credit score under 620, while other lenders will offer those loans at a higher interest rate. As a benefit, some lenders will automatically approve loans for people with a score of 750 or higher.


Credit Bureau Agencies

There are three primary credit bureau companies: Equifax, Experian and TransUnion.  Each of these three companies refer to their credit scores by different names. At Equifax they refer to their score as the beacon score, at Experian, it is the Experian/FICO score, and at TransUnion, it is called Empirica.

What is my Credit Score?

Your FICO score is available on the Internet at either www.myfico.com or at the Web sites of any of the major bureaus. In addition to your FICO score, you will obtain your entire credit report. Details on how to read your report and ways to raise your scores will be included in the report.


What is in the FICO score?

There are five criteria that make up your credit score.  Payment history is the biggest area that FICO scores focus on.  If you have paid your bills on time, the score will be affected positively. About 35% of your score will reflect the bill payment history, 30% of your score is affected by open loans, 15% is the length of your credit history, 10% of your score is new credit, and the remaining 10% is the types of credit you use. Race, religion, sex, marital status, your age, length of employment, job description, where you live or any items reported as child or family support will not reflect on your credit score.


Raising your score

Strongest contributor to the improvement of your score is on time bill payment. In addition, keeping the balance on your credit cards low will help. Limit the credit applications to the absolute minimum. Always check your credit report to make shore it is accurate. If a mistake is found, you should correct it as soon as possible. By law, all three credit-reporting agencies must respond and report back to you within 30 days if you challenge any information on your credit report.


Inquiry

An inquiry is a record of any person that has checked your credit. Constant inquiries will lower your FICO score since it shows that you are constantly applying for different lines of credit.  This is a good reason for you to check your credit report yearly.  Inquiries from mortgage lenders or automobile dealers in a short period of time will not affect your score. This will be considered one inquiry and it will show that you are sopping for a specific product.


If you are declined

Equal Credit Opportunity Act requires the lender to notify you within 30 days with the reason you were declined and you will have 60 days to request a free credit report form any of the credit reporting agencies.