How important is your credit score? If you want to borrow money, it can mean the difference between an affordable option and no option at all. If you buy a house or a car, or your child is applying for a credit card for the first time, chances are a lender will request a credit score before making a decision.
A credit score is a number, based strictly on credit history, created to help creditors weigh the risks they take when they loan money. Your credit score determines whether you can get credit and your interest rate. Higher numbers look better to lenders and many times, those with higher scores get lower interest rates. Your score plays a vital role in most borrowing situations, so it's important to understand what goes into it.
According to FICO® (Fair, Isaac Corporation, the developer of today's most commonly used scoring system, scores can range from 300 to 850. Most people score in the 600s and 700s, and scores break down along these lines:
|499 & below||1%|
|800 & above||11%|
||740 - 799
||670 - 739
||580 - 669
Don't assume that just because your score falls in a certain range, a lender won’t talk to you. Everyone’s rules are different: One lender may approve only customers with the highest numbers, while another may offer a lower interest rate depending on your score.
It changes over time as your credit maintenance changes. Depending on a variety of factors, your score can go up or down at any time. In fact, every time you apply for, use, make or miss a payment on a loan or credit card, you add on to your credit report and either raise or lower your score.
A variety of factors in your credit report make up your credit score:
Raising your credit score and improving your credit history go hand in hand, so it's important to know what's on your credit report and take responsibility for proactively monitoring it. Thanks to the federal Fair and Accurate Credit Transactions (FACT) Act, you are entitled to a free copy of their credit report once every 12 months from each of the three credit bureaus – Equifax, Experian and TransUnion. You can get your free reports by going to www.annualcreditreport.com or by calling 1-877-322-8228. You also can write:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, Ga. 30348-5281
If you review your credit report and something seems unusual, be sure to check with your credit card company or lender as soon as possible. Roughly 7-10 million Americans are victims of identity theft each year, and the last thing you need is to be a thief’s next victim.
What can you do? Be vigilant, as you would be with any type of theft. It can be as easy as doing the following simple tasks:
Learn more about the warning signs and specific steps you should take to gain a greater level of protection against identity thieves – to help guard against becoming a victim.