Your credit score meaning - knowledge is power
What actually does credit score mean? We all know that credit scores are important when we want to buy a home or a car or take out any other type of loan. But what is the actual credit score meaning? A credit score is a rating that is compiled based on your credit history and it allows a lender to determine the risk of lending you money.
You should know firstly that credit score and credit report are not the same, they are two different things but they are related. The actual credit score is a number that is calculated by the credit bureaus and the score is to give lenders the risk associated with lending money to a person. A credit report is basically a summary of a person’s credit history and credit rating. The report and score is often used combined by banks, lenders and employers to make their decision on your risk level.
Your credit score is calculated using the FICO score method. This method was developed by the Fair Isaac Company that designed software to calculate credit scores. The FICO method is used regularly by many institutions to calculate credit scores based on a person’s credit history.
A credit report will list all of a person’s credit requests including payment history, how much credit you use, how many credit accounts you have and whether you have ever claimed bankruptcy. The credit report does not actually contain the credit score. You can check your credit report once a year and you should do this to see if there have been any relevant changes to your history. Occasionally there may be errors or misunderstandings and this is another reason that you should check your credit report once a year.
You can request a copy of your credit report from any of the three credit bureaus, TransUnion, Equifax and Experian, and you can make one free request per year. You can also request your FICO credit score once a year free of charge.
A FICO score will be between 300 and 850 and the higher your score is the more likely that you will be eligible for loans at lower interest rates. You will be more likely to qualify for mortgages, car loans, credit cards and any other type of credit related purchase. The higher that your FICO score is the lower the interest rate you will be charged. If you maintain a good credit score then you are being rewarded for it. However if your FICO score is low then you will find it difficult to qualify for any loans and those loans that you are approved for will likely have a very high interest rate.
It is a good idea to understand these basics of credit scores and what they mean to you. If you pay a bill late every now and then your score won’t be affected dramatically, particularly if you have a long history of good credit, but if you are constantly paying bills late or missing payments altogether then this will have a drastic effect on your credit score.
TAGS: credit score meaning, what is my credit score, how do I find my credit score
Article Source: Messaggiamo.Com
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