Understand where credit scores come from

 

If you are going to improve your credit score, then logic has it that you must understand what your credit score is and how it works. Without this information, you won’t be able to improve your score very effectively because you won’t understand how the things you do in daily life affect your score.

 

If you don’t understand how your credit score works, you will also be at the mercy of any company that tries to tell you how you can improve your score – on their terms and at their price.

 

In general, your credit score is a number that lets lenders know how much of a credit risk you are. The credit score is a number, usually between 300 and 850, that lets lenders know how well you are paying off your debts and how much of a credit risk you are.

In general, the higher your credit score, the better credit risk you make and the more likely you are to be given credit at great rates. Scores in the low 600s and below will often give you trouble in finding credit, while scores of 720 and above will generally give you the best interest rates out there. However, credit scores are a lot like GPAs or SAT scores from college days – while they give others a quick snapshot of how you are doing, they are interpreted by people in different ways. Some lenders put more emphasis on credit scores than others.

 

Some lenders will work with you if you have credit scores in the 600s, while others offer their best rates only to those creditors with very high scores indeed. Some lenders will look at your entire credit report while others will accept or reject your loan application based solely on your credit score.

 

The credit score is based on your credit report, which contains a history of your past debts and repayments. Credit bureaus use computers and mathematical calculations to arrive at a credit score from the information contained in your credit report.

 

Each credit bureau uses different methods to do this (which is why you will have different scores with different companies) but most credit bureaus use the FICO system. FICO is an acronym for the credit score calculating software offered by Fair Isaac Corporation company. This is by far the most used software since the Fair Isaac Corporation developed the credit score model used by many in the financial industry and is still considered one of the leaders in the field.

 

In fact, credit scores are sometimes called FICO scores or FICO ratings, although it is important to understand that your score may be tabulated using different software.

 

Let’s face it, credit score knowledge can help you boost your credit score.

 

Knowledge is power.

If you want more information, please reach out.