Credit Score

What is a Credit Score?

Your credit score is a three-digit number based on your bill-paying history and debt profile. Lenders use this to determine the likelihood of certain credit behaviors, including whether you will pay on time and your credit score will have an important impact on the interest rate you will pay to borrow money.

A credit score is not included in a consumer credit report and must be purchased separately. Be sure to review your free credit report (see my credit report article) and insure its accuracy prior to paying for your credit score.

Credit score are also being used for purposes other than determining whether you will default on a loan or make late payments. For example, some insurers are using low credit scores as indicators to identify individuals they believe are more likely to make claims against their insurance policies. An accurate credit score can make the difference not only in interest rates charged on loans, but also on the availability and cost of insurance, an important essential for most families.

What do the scores mean?

The higher the score, the better your credit rating. In general, a credit score can range from 300 to 850 and the higher your credit score the easier it will be for you to get a loan and the better the interest rate offered. The boundary between standard loan and a higher cost loan, also known as a subprime loan, is usually a credit score of 620.

How can I get my credit score?

If you have applied for a home loan after December 1, 2004, the lender is required to give you your credit score. If not you may contact the three major consumer credit report agencies at:

(800) 685-1111                                   (888) 322-5583                                   (800) 888-4213                              
P.O. Box 740241                                P.O. Box 2002                                    P.O. Box 1000
Atlanta, GA 30374                            Allen, TX 75013                                  Chester, PA 19022

How is my credit score calculated?

Some of the most important factors in determining your credit score include your previous payment behavior, how much you owe, how long you have held outstanding credit, whether there are a lot of inquiries from prospective lenders (except if you are shopping for an auto loan or a mortgage within a short period of time), the type of credit you use, and how much credit is available to you.

Tuesday, December 29th, 2009 Credit

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