What Is Your Credit Score? How Do You Find Out Yours?
If debt is an issue for you, and your are concerned about paying it off, then you probably know that too much debt, missed or late payments, and a variety of others, can have a derogatory affect on your credit score.
So how do you find out what your credit score is or better yet what is a credit score?
The Fair Isaac Corporation was founded in the 1950s by an engineer named Bill Fair and a mathematician named Earl Isaac, in order to create a credit scoring system. The first credit scoring system was built in 1956.
Over the years, Fair Isaac Corporation has developed more sophisticated credit scoring systems and software to determine and predict persons credit worthiness.
For example, the more likely it is that someone will default on a loan, the more in interest that they will pay.
Today, when a bank or lending institution is considering whether to give someone a loan, there are 3 major credit-reporting agencies to choose from in order to obtain a person’s credit score. Once the credit report is obtained by the lender, they can then decide whether to give them a loan and what the interest rate will be.
Equifax, Transunion, & Experian are the three major credit reporting agencies. Where does Fico come in? All of these agencies use FICO software information to determine your credit score, ranging from 300 to 850, with most Americans falling in the 600s to 700s. In today’s current economic climate and with tightening credit standards, a credit score in the 700’s is often necessary to get a mortgage loan, especially one with a decent mortgage rate.
Your credit score is calculated by these FICO standards:
Payment History: 35 percent - Don’t be late! Amount you Owe: 30 Percent - Don’t borrow excessively in proportion to your credit history! Length of your Credit History: Credit cards that you have had for a while and you have made regular and on time payments will help give you “brownie points” New Credit: Number of recent accounts opened, number of recent credit inquiries - applying for a lot of loans at the same time will hurt your credit Types of Credit Used: Credit cards, retail store accounts, installment loans, mortgage loan, etc.
To get a free copy of your credit report go to - www.annualcreditreport.com and request it. You are entitled to a free report every year. They are the only site authorized by the Federal Government to provide this service. The FTC or Federal Trade Commission recommends that you go to their website at http://www.ftc.gov/freereports and link to them directly from their site in order to make sure that you are going to the official credit agency’s site. Your credit score is not included in your credit report, and in order to get that you will have to pay one of the 3 credit reporting agencies Equifax, Experian, or Transunion
