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What Does The Term Credit Score Mean To An Average Citizen
A credit score is a numerical expression based on a statistical analysis of a person’s credit files,a measure of credit risk calculated from a credit report using a standardized formula.Factors that can damage a credit score include late payments,absence of credit references, and unfavorable credit card use.Lenders may use a credit score to determine whether to provide a loan and what rate to charge.
Lenders,such as banks and credit card companies,use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt.Lenders use credit scores to determine who qualifies for a loan,at what interest rate,and what credit limits.The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system.
Credit scoring is not limited to banks.Other organizations, such as mobile phone companies,insurance companies, employers and government departments employ the same techniques.Credit scoring also has a lot of overlap with data mining,which uses many similar techniques.
In the United States of America, a credit score is a number based on a statistical analysis of a person’s credit files,that represents the creditworthiness of that person,which is the likelihood that the person will pay their bills.A credit score is primarily based on credit report information, typically from one of the three major credit bureaus,Experian,TransUnion and Equifax.
There are different methods of calculating credit scores. FICO is a credit score developed by Fair Isaac & Co.It is used by many mortgage lenders that use a risk-based system to determine the possibility that the borrower may default on financial obligations to the mortgage lender. The credit bureaus all have FICO alternatives:Equifax’s ScorePower,Experian’s PLUS score and TransUnion’s Credit score.
Americans are entitled to one free credit report within a 12-month period from each of the three agencies.The three credit bureaus run Annual credit report,where users can get their free credit report,normally without credit scores.Credit scores are available as an add-on feature of the report for a fee.
In some states such as California and Colorado a consumer is entitled to a free credit report within 30 days of being denied credit or receiving sub-normal credit terms from a lender due to their credit rating.
Boost Your Credit Score
Boost your credit score by collecting all your bills and financial papers and giving them a spring cleaning, regardless of the time of year. Everyone wants a perfect credit score of 850 or to increase their credit rating to the best possible credit score. This is the main factor lending agencies consider when extending a loan or approving credit cards. Lenders want to know your payment history and credit scores are the way they get this information quickly and easily.
What makes up a person’s credit score? How it becomes part of their credit history? A credit score is based on information gathered by the three U.S. credit bureaus: Equifax, Experion and Trans Union. Your credit score history began with the first purchase you ever made using credit. You didn’t do anything for the credit information to get into your credit history. You simply signed a credit note or credit agreement promising to repay the credit lender the funds of the loan or credit card through payments of a specific minimum amount over a specific period of time. The credit lender extending the credit, whether is was for an automobile, furniture or something else, automatically entered your credit information into the credit bureau systems and your credit payments were recorded and monitored until you paid in full. When you paid a loan in full, that account was marked “closed”. In the case of a credit card, the account would remain open as long as you are authorized to use that credit card account.
If you made no late credit payments, the credit entry became a good reference for your next purchase. All late or insufficient payments were noted and if there were many, a bad mark was placed on your credit history. As you began to use more credit, your credit history grew. The credit bureaus generated a credit score based on your credit repayments. Today, a credit score of 750 is considered a very good credit rating; a credit score over 750 is excellent while a credit scores below 600 is poor.
Boost your credit score by keeping your credit history up-to-date and making every credit card or other credit payment on time. Commit to avoid making any late credit payments. Pay off some of your credit debit completely. Reduce your overall credit debt to income ratio.
You should obtain a copy of your credit score report. Credit reports are now available, at no cost to you except postage and handling, once per year by requesting them from the credit bureaus. Check each credit entry, making certain that all credit entries actually belong on your credit record, that credit accounts you have paid off are marked ‘closed’ and clear up any errors or credit entries that haven’t been recorded properly. You might even find credit history that has not been recorded at all. The credit bureaus will send a form to request any corrections; simply fill out this form and return it by mail. After a few months, obtain another credit report and verify correction to your credit records. Check to see if you have successfully increased your credit score. By increasing your credit score even a few points at a time, you will be able to gain more buying power through prudent use of credit.