A Simple Credit Score Explanation - How Many Reporting Systems Are There?
Credit scores play an important role in our lives whether we like it or not. They determine what houses we can buy, what cars we can drive, and what kind of luxury goods we can afford. Despite all this many Americans are not aware of what their credit score is, or even how it is calculated! So here is a short credit score explanation.
Your credit score is a number based on the analysis of your credit report. They are used by banks to determine how much money they can safely loan you and expect to be paid back with interest. Obviously having a low score is not a good thing if you want a brand new car or house in the suburbs. The most common score used today is the Fair Isaac Corporation (better known as FICO) score.
When providing a FICO credit score explanation, there is a few key things that must be addressed. First is that there are "copy cats" out there offering what is derisively known as a "FAKO" score. These are often cheaper but you get what you pay for, so if really need to know the exact score being used by your bank for your home loan application, you should make sure you are getting a genuine FICO score.
Second, you need to know how to read your score. A FICO score is given on a range of 300 to 850. Having a credit score of 400 may sound impressive to the novice, but if your credit score is this low you need to strongly consider taking steps to better manage your finances and your credit! Third and finally, there are actually three different FICO scores offered by the Fair Isaac Corporation itself. One for mortgages, one for car loans, and one for consumer credit (credit cards). Lastly, the FICO and "FAKO" scores are by no means all that are out there. If you take one thing from this credit score explanation then let it be that there is no one universal "credit score." There are probably nearly a dozen models out there, each a with their own system. If you purchase your score from multiple companies and they vary by as much as 100 points this does not mean that one of them is "fake." Keep in mind your credit history itself will play a big role in determining whether or not a bank is willing to give you a substantial loan, as well as your income. Thank you for reading this credit score explanation, hope you enjoyed it!
Free Online Credit Scoring Report
| 
