The Basics of Your Credit Score and Credit Reporting
One of the most important things that lenders look at when deciding to offer you a loan or a credit card is your credit score. Your credit score shows lenders your financial history with banks and other lenders, and it reveals whether or not you have been responsible with past payments.
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If you have a good credit score, then you will be approved for:
- Home Mortgages
- Student Loans
- Credit Cards
- Auto Loans
The better your credit score, the better rates you will get for your loans. And that will save you a lot of money.
What is a Credit Score?
These are the scores lenders review to determine if you are financially responsible. Credit scores are also known as FICO scores, which stands for Fair Isaac Corporation, the company that developed the equation for determining your credit score.
How many Credit Scores do I have?
You have 3 credit scores. You can obtain a free credit report from each main credit reporting agency:
What is an Annual Credit Report?
A credit report is a document provided by a credit reporting agency that reveals an individual's past credit history.
How do I know if I have an Annual Credit Report?
You will have a credit report if you have every applied for a student loan, car loan, mortgage loan or credit card
What determines my Credit Score?
There are a few main factors that determine your credit score:
- Payment History - Have you paid past accounts on time?
- Amount of Money you owe - You don't want to owe too much money on too many different credit cards.
- Credit History Length - The longer you have been establishing a good credit history, the better.
- New Credit Accounts - Opening too many different accounts in a short amount of time shows lenders you are not financially stable.
- Variety of Credit - It's good to have a healthy mix of different credit scores, such as for credit cards, loans and mortgage payments, but having too many will lower your credit score.
What is a Good Credit Score?
Most credit scores range between 300 and 900. A good credit score is 700 and above.
How do I get a Bad Credit Score?
There are many factors that can damage and lower your credit score:
- Missing payment due dates on accounts
- No credit references
- You are in debt from your credit cards
- Short credit history
- An account has gone to a credit collection agency
- Having too many open accounts
Are other scores besides FICO scores used for a Credit Report?
FICO scores are the most commonly used scores, but some lenders do use their own credit scoring process.
Does my FICO score change?
Your FICO score constantly changes whenever your credit information changes
You should check your credit score at least once a year with any of the top 3 credit reporting agencies to make sure that your information is correct and that no one is stealing your identity.
Your credit score and credit report are going to follow you for the rest of your life, so if you would like to get a future loan or credit card account, you need to make sure you establish a good credit history.