Credit Score Basics
What Does Your Score Mean?
When you need to borrow money, your credit score is considered the most influential factor in a lender’s decision to grant you credit and at what interest rate. Borrowers with low scores may be turned down for loans and credit or will pay a higher interest rate than borrowers with high scores.
Your credit score indicates your trustworthiness in paying debt and gives a glimpse into your spending habits. Every time you apply for a new credit card, mortgage, insurance policy and sometimes a job, your application is judged in part on your credit score.
What Composes A Credit Score?
Fair Isaac & Co. of Minneapolis created the widely-used credit score model, which is why you’ll hear “FICO credit score” used to describe that magical three-digit number.
FICO considers these elements when calculating your score:
- Payment history
- Length of history
- Amount owed
- New credit
- Amount of available credit
- Types of credit used
You can monitor your credit history by requesting a free credit report every 12 months at www.annualcreditreport.com or by calling (877) 322-8228. Reports are available from the three credit reporting agencies: TransUnion, Experian and Equifax.
Click here for tips on improving your credit score.