Simple Credit Score FAQ
If you are reading this Credit Score FAQ you most likely have questions about credit scores. This is not unusual, credit scores have a big impact on our lives yet most American consumers probably have no clue what their current score is. Hopefully after reading this Credit Score FAQ you will feel more confident and informed.
The first and most obvious thing we must address is: What is a credit score? Credit scores are numbers based on the statistical analysis of a person's credit history. It is used by banks to determine how "safe" of a borrower you would be. If a bank feels, based on your history and score, that you would be a good prospect for a loan then you may get a low interest rate. If the bank feels you would be a poor candidate and some risk would be involved in lending you money, then of course your interest rate will be much higher.
How is your credit score calculated? This is a much more difficult question to address. There are a number of credit reporting agencies which offer to sell you your credit score. Each uses a slightly different method so there is no universal credit score. This topic is covered in more detail in another section of the site besides this Credit Score FAQ.
How do I know where to buy my credit score from? With the wealth of credit score information on the net there are many options. Some reliable, some are not so reliable. One of the more widely used standards for calculating credit scores is provided by the Fair Isaac Corporation (FICO). This can be used as a keyword in your search for a company offering credit scoring services. What if I get don't get the same score from multiple sources? Since credit scoring formulas are proprietary it is not unusual you will receive multiple scores for the same credit history. If you want, you can average these numbers yourself to get an idea of what your "average" credit score is. If you have more questions that were not addressed in the Credit Score FAQ please look at other, more detailed sections of the site. Your credit history is very important and doing thorough research both into what data the banks are using on you, as well as how they evaluate it, is a wise choice to make. Good luck with your search.
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