There are many people
out there who are unaware of what their credit score is or how much
it already could be affecting their wallet or could in the future
if habits are not changed. Lenders have been using your credit report
score in determining whether or not to grant you a loan and to calculate
your interest rate for some time now. The loan officer knows what
a powerful tool for predicting future behavior the credit score can
be and has proved over and over again to be.
Credit scores measure
risk through mathematical calculations, using statistical research
to view each consumer. FICO, which is the most widely used credit-score
formula was created by Fair Isaac. FICO scores are now often requested
for such simple applications in categories such as cell phone providers,
utilitility companies, landlords and even prospective employers. It
seems that your credit score can affect a lot more than just getting
that low interest rate on that all important home or auto loan.
Managing your credit score
and knowing your score and what is included on the report should be
a priority for anyone. First you need to educate yourself on how your
credit score is determined and calculated by these reporting companies.
In order to calculate
the score of just one individual, FICO credit system uses 22 pieces
of data, which they collect from each of the three major credit bureaus
and use in their analysis. The system seems to break down into separate
categories and then put together a composite of all category scoring
into a final outcome. Payment history, types of credit used, current
debt, length of your credit history and new credit are the determining
factors in credit scoring.
Even though people may
think so, income is not a factor in a credit score and does not reflect
upon the final score. Individual or variable factors are not taken
account in a credit score so that the final outcome is more mathematical
and analytical in nature, not using personal feelings or considering
circumstance. Credit scores are simply predictors for future behavior
based on past experience and behaviors.
The lowest possible credit
score to have is 300 with the highest rating an 850. The higher your
score is, the lower the possible risk to a creditor, and the better
your interest rates are going to be. Having a score that is 800 or
above is hard to obtain, with only an average of between 13-18% of
the population having an 800 or higher credit rating. The average
median credit score is more on average between 700 and 750.
Your FICO score is different
from your credit reports. If you want to take a look at your credit
reports, this is ALWAYS the place to start when it comes to credit
repair. In 2003, The Fair and Accurate Credit Transaction Act entitles
you to a free credit report from each of the three major credit bureaus
once a year. Make sure to request yours to keep up to date on what
is changing on your report.
Staggering when you request
the reports also helps you to keep up to date on any changes and staggering
the reports will also help you to spot bad information sooner. Many
places can help you to obtain your credit report. A comprehensive
list is included below to help you to getting your hands on your credit
report. The most detailed information to be found online when it comes
to credit scoring seems to be from the creators at myfico.com. You
can go to the Credit Education area for the most up to date information
regarding your credit report and rights. They have reasonable fees
and offer a discount on pricing when buying all three credit bureau's
reports, which is highly recommended.
Because credit reporting
is based on time and all three agency do not run like clockwork when
it comes to which tasks are at hand. When one bureau reports something
and when another bureau dates something could vary greatly. It would
be imposbbile for each bureau to keep track of there reports all on
the same schedule.
You will find that each
bureau has different schedules and ways of reporting which makes it
the most advantageous to have all three reports. You want to be able
to make sure that all three bureaus show the same things and that
one does not report something that the others do not, which is often
the case when one bureau receives a collection activity notice and
the others don't.
