A Lesson in Credit Scores
By now you know that your credit score can affect you in multiple ways, not just in your purchasing power but also mentally and emotionally. But what even is a credit score composed of?
Three independent credit bureaus exist and create credit reports and any creditor looking to lend you money will consult with these credit bureaus to decide if you are creditworthy.
These credit bureaus create reports that produce a three-digit number you’ll know as a credit score. A credit score takes into consideration all of your credit report information and provides a number that is easy for lenders to interpret and minimizes the possibility of bias.
- The number of credit card accounts you have and the borrowing limits and current balances.
- The amounts of any loans you’ve taken out and how much of them you’ve paid back.
- Monthly payments on your accounts and whether they were made on time, late, or missed.
- Severe financial setbacks, if any, including mortgage foreclosures, car repossessions, and bankruptcies.
There are different models used that provide you with a credit score, such as FICO Score and VantageScore, but they both associate a better credit history with a higher score, and assign a lower score to those with lower creditworthiness.
Want to know more about your credit score? Receive a FREE credit evaluation today!