The Term Credit Score was not a house hold word used in our every day lives just a few short years ago. Although some people understood the phrase and its purpose the mainstream of folks had no reason to understand what their credit score was and how it affected their chances of obtaining a low interest rate loan. Most folks had jobs and could pay the bills so they didn't have to worry about there credit. Not to mention identity theft theses days.
However, in the society we live in today, with identity theft on the rise, job loss, foreclosures, bankruptcies, etc. There are few folk who haven't heard the term credit score.
Your? score is accentual a number between 300 and 850. It's determined by your past credit habits as well as current credit habits. The way you handle your it, do you pay on time, have you missed any payments, are you over extended,? are all factors that determine your score. It is used by lender to characterize the credit value of an individual. How likely it is that you can or will pay back your debts. Credit scores are based on what any lender you have a loan through reports to the credit bureaus, good or bad.
Lenders, such as credit unions, auto finance companies, mortgage companies, and credit card companies use credit scores to calculate the prospective risk you pose to them if they give you a loan. These companies use your credit scores to decide if you meet the criteria for a loan, at what interest rate you will have to pay the loan back at and how much they will let you borrow.
FICO, is by far the most recognized credit score in the U.S.? By the way if you didn't know what FICO stands for it's the (Fair Isaac Corporation). Just about every lender I know uses your FICO score because they provide the most well-known and most trusted credit scoring system in the U.S.
Any information in your FICO file will be used by the lending community.
Besides the FICO score, there are three major credit reporting agencies in the U.S. Equifax, Experian and TransUnion, and they each have their own formula to calculate your credit scores.
The method used to produce your scores is federally regulated. The Federal Reserve Board's Regulation B, which implements the Equal Credit Opportunity Act, expressly prohibits a credit scoring system from taking into consideration anything such as race, color, religion, national origin, sex, or marital status. It also stipulates that credit scoring systems must be "the same for all" and "statistically sound".
In addition, if you are denied credit for any reason, then a detailed explanation of why your were denied must be provided to you. They can't just tell you your? score is to low. They must be specific in the details for the denial; something more like" too many late payments of 30 days or more" is the way it must be presented to you in righting.
Even though we don't really knows the exact formulas for calculating credit scores sense it's a strongly guarded secrets, the Fair Isaac Corporation has given the following information as part of their formula.
35% punctuality of payment in the past (30 Days Past Due)
30% the amount of debt, expressed as the ratio of current revolving debt to total available revolving credit
15% length of credit history
10% types of credit used
10% recent search for credit and/or amount of credit obtained recently
That's all nice and everything but what are they really saying? They really aren't say much, if you look at the percentages that they offer there's a lot that can be left for interpretation understanding a credit score. 10% of the score is the "types of credit used" we what does that men exactly. "Length of credit history" is also a murky concept; it consists of multiple factors two being the oldest account open and the average length of time an account has been open.
FICO also says only 35% is attributed to punctuality, well if a consumer is considerably late on several accounts, his credit score is going downhill more than 35%. Bankruptcies, foreclosures, and judgments affect scores considerably, but FICO make no mention of this.
Since the three major credit bureaus have their own, self-governing databases, each one of us in fact has three credit scores for any given scoring system. As these databases are independent of each other, they may contain totally different data. Most lenders will look at your credit score from each of the big3 bureau and use the average score to determine the applicant's credit merit.
Each legal U.S. resident is permitted to one free copy of his or her credit report from each of the big3 credit reporting agencies once a year. To guard against inaccurate information or identity theft or fraud you can check your credit score more often than yearly, you can ask for a report from a different credit reporting agency available online. This information is offered from a ton of websites online that offer a free credit report and use of their services for 30 days. After which, there is a monthly fee involved. But for the peace of mind it can offer you the monthly fee is worth every penny.
In a time where identity theft and credit fraud in on the rise, the fee these firms charge seems like a small amount to pay to protect your credit and your good name. Having a good credit score is becoming more and more prevalent in our society.
Many employers these day also do a credit check on you if you're applying for a job with them. The truth is that you must keep your credit score in good shape.
AutoCreditAfterBankruptcy.com is a sight dedicated to every day folks with valuable answers concerning credit, how to get it, and how to sustain a quality credit score.
Autocreditafterbankruptcy.com's website was established to help every day folks with credit problems who could not get helped for an auto loan by traditional auto dealers. It all started after we went through a foreclosure and a bankruptcy. Then we were having trouble finding a company that would work with use to obtain a bad credit car loan. we just couldn't find the answers. so we decided to find the best answers possible to the questions you need answered most, so we can get you out of that bad credit situation.
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