Have you had trouble getting a loan recently? Did you ask the bank why you were turned down and were told that your credit score is too low? Maybe you hadn't even heard of the term "credit score" until then? Well, it's time to stop being confused and start learning a few facts. Starting with what a credit score means and what your score may mean for you.
Basically, a credit score is a number representing your rating of credit worthiness, and determines such things as whether you can obtain approval for a loan and what type of interest rates you can get. The number of your credit score is determined by a statistical formula that is only known to the credit reporting agencies. Therefore I cannot tell you exactly how your credit score is calculated. However, it should be enough for you to know that your credit history is very important, especially your past loan payment record. This record, along with other information provided by your creditors, should be available on your credit report.
Banks and other lending institutions will want to know your credit score so they can determine whether you will be a responsible borrower who can make payments on time. Therefore a good credit score is essential if you are looking for someone to extend you a loan. A credit score can make the difference between qualifying or being denied. If you do qualify for a loan, your credit score may effect the rate of interest that you get, as well as your credit limit.
There is actually more than one statistical model for determining your credit score, meaning that there are several different types of credit scores. Among these, the one most widely recognized in the United States is the FICO score. This refers to the Fair Isaac Corporation, which is the company that developed the proprietary statistical formula that is used to calculate your credit score. You can go to the FICO website to check on your credit score online--though you would have to purchase a membership or pay a fee to do so. However, it will be money well spent, as knowing your credit score is essential if you want to manage your finances in the best possible way. Learning whether your credit score is going up or down can tell you when to adjust your spending and financial activities in order to stop your score from dropping. In the long run, it will mean a better credit score and with it, the benefit of qualifying for more loans at more favorable interest rates.
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