Your Credit Score and What It Affects

Whenever you get new credit, regardless of if it is you applying for a credit card

or trying to obtain a mortgage loan, the most critical factor that will decide if you get the credit is your credit score. And if you do get the credit, your credit score will largely dictate the terms of the loan.

Your credit score, also known as your FICO score, is a single number that assesses your overall credit risk. The reason that it is a number is because a number is easy for anyone to take in at a glance and understand. This single number combines all of the various factors that go into determining your credit worthiness. So rather than spend a half hour or so going over the various entries in your credit report, in most cases the creditor can simply look at your credit score and make a snap decision to give or deny your the loan.

The range of credit scores varies from credit company to company. The normal range is from 300 to about 850. The higher the credit score, the better it is for you and the more alternatives you will have when it comes to getting credit. You may also hear the credit score referred to as a FICO score, an Empirica score, and other names.

The credit score is not something that's been around forever. In fact, seeming as how it has only been popular since about 1995, it is a relatively new way of determining someone's credit worthiness. And now, just about every financial institution in the country uses them. They are also used by the marketing departments of various financial institutions to determine who they should send out their various credit offerings to.

Finding out your credit score is simple. You simply contact the various credit reporting agencies and ask for your credit report. Each company is compelled, by law, to provide to you, free of charge, one copy of their credit report per year. The law does not, however, require that the credit reporting company gives you the credit score along with the credit report. Some will give it to you free, others will charge for it.

If the company does charge you, it will only be a nominal charge. And, knowing their credit score is something that every consumer should know. Without this knowledge, whenever you enter into a financial situation, you are doing so virtually blind.

Since each credit reporting company has its own methodology of determining credit scores, your score won't be the same from each company. This is because each credit reporting company does not necessarily have the exact credit related information about you in their files. But, even if the scores don't match exactly, they should come pretty close to each other.

If you have a credit score near 700 or so, you fall pretty much squarely into the average range of most Americans. If your score is under 500, you have some serious work ahead of you to bring your credit score back up to par.

Your Credit Score and What It Affects

By: Susanna Berlatsky

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