Keeping up with Your Credit Score

A credit score is one of the simplest factors to determine your financial health when you apply for a loan. It’s also the criteria that the creditor will use to decide if he wants to risk giving you a loan or not.

It’s 3 of the most powerful digits you will ever encounter when asking for a loan. It’s not just a random number, though. Your credit score is calculated by using a mathematical equation that’s based on a system of statistics that awards points gleaned from credit report information.

Your credit score is public information once you decide to apply for a loan. Any lender has the right to request your credit score before making the decision whether or not to lend you money. Late payment history, bankruptcies, foreclosures and legal judgments are all there to view.

There are 3 major agencies that are set up to report credit. These are Experian, Equifax and Trans Union. Oddly enough, you can have a different score for each agency if they use different data. So you need to check your credit report and score at least once or twice each year. If there’s any missing or incorrect information, you can request that it be corrected. Then your credit score will have the best and more accurate facts available.

The Fair Isaac Company created what’s called the Beacon FICO score that’s commonly used. This rating ranges from 350 to 850, which is the best. If you have a score of below 600, this indicates bad credit which will cause higher interest rates on your loan.

It is estimated that 62 percent of consumers don’t realize how their credit score affects them. Simply put, it matters. It’s what the lender looks at to decide if you will even get a loan or not, and what the interest rates will be in repaying it. Your credit score is the deciding factor in determining those things. Other factors will come into play such as any equity you may have, your job history, income amount, any savings, and what sort of loan you want.

Unless you have a perfect credit score, there’s always room for improvement. Keep a close watch on your personal credit numbers.