Credit Score Basics
What Is A Credit Score?
The majority of people understand the basics, like how failing to make a payment will cause your score to go down, but there are a number of complexities that trip up the average consumer. If you pay your debts on time, don’t carry too much debt on any one card, don’t close older accounts unless absolutely necessary and only apply for new credit when you have to, you will generally be in good shape. However, it is important to keep yourself informed so you can maintain a credit score that accurately reflects your consumer status.
Lenders use your credit report in order to judge your reliability as a loan candidate. Your credit report indicates your ability to handle debt responsibly and will help banks decide if you are a desirable loan customer. A high credit score can help you lock in low APR rates or secure special deals on loans. A bad credit report may prevent you from securing loans and can damage your ability to buy a car, open a credit card or rent a home. A history of inability to manage your credit successfully will make lenders uncomfortable about trusting you with additional funds in the future.
You are entitled to a free copy of your credit report once a year, an offer you should take advantage of. When you do receive your credit report, check to ensure the figures are accurate and act quickly to correct any mistakes. This may include any clerical errors, identity theft issues or incorrect information. If your credit score is low, you should begin working on a financial rehabilitation plan. Call us to help evaluate what strategy will be best for you and the time to correct it.
Are all credit scores the same?
The answer is No. In fact there are many scoring models being used today. One thing that is very important to know is that FICO (Fair Isaac Company) is the preferred scoring company used by lenders. The scoring scale for FICO is 300-850. Figures provided by FICO Inc. show that 25.5% of consumers–nearly 43.4 million people–now have a credit score of 599 or below.
Vantage Score is a product that is competing for market share within the credit scoring world. The scoring scale for Vantage is 501 to 990, a drastic difference from FICO. If you are monitoring your scores, make sure that the monitoring company is using FICO scores as that’s what the majority of lenders and underwriters are using.