posted by admin on May 31
In America, a credit score is a number based on statistical information concerning a person’s credit files. A credit score is something a finance company/lender/bank will use in order to determine a person’s creditworthiness, which basically means whether or not someone will likely repay a loan. A person’s credit score is based upon information contained in a credit report, typically received from one the three major credit bureaus: TransUnion, Experian or Equifax.
There are different ways in which a credit score is calculated, FICO or Fair Isaac Corporation is the most commonly known type of credit score. FICO is used by many mortgage lenders and it involves using a risk-based mathematical system to determine the chances of a borrower defaulting on a financial obligation. Each credit bureau has its own scores: Exquifax’s ScorePower, Experian has PLUS score and TransUnions credit score and each bureau also sells the VantageScore. Additionally, many bigger lenders and credit card companies have a proprietary scoring model which is utilized in combination.
There have been several studies performed and it has been determined that credit scores can affect such things as underwriting for credit and insurance, and a better score results in lowered costs for insurance premiums. Citizens of the US are entitled to one free credit report from each individual credit agency, but not entitled to receive a free credit score. It is on a website like www.annualcreditreport.com, where a person can get a free credit report. If a person contests an item on the credit report, the credit bureau under the Fair Credit Reporting Act, has approximately 45 days to investigate.
If someone wants to obtain their personal credit score, it can be purchased through a credit bureau or a FICO score can come directly from Fair Isaac. Credit score information is also available for free from having a subscription to a credit report monitoring system which can be through a credit bureau or a third party agency. To obtain a free credit score, most websites or companies charge a nominal fee which is billed to the consumer via a credit card, while some offer a free trial subscription.
Lenders such as banks and credit card companies will use a consumers credit score to evaluate the risk potential someone has. Banks and lenders will use a credit score to determine if a person qualifies for a loan, at what interest rate and how much of a loan the individual is eligible for. Credit scores are also used to determine which consumers are most likely to bring in the most money. It is important to pay attention and understand what information is contained on a credit report because it directly influences the credit score a person will have. Become educated now and protect your most vital asset, because without credit you will be limited to what you can do in life.
Leave a Reply