Do You Need to Know Your Credit Score?
Knowing your credit score is just one part of being an informed consumer. But even if you know that magical three-digit number, do you know what it actually means? Here’s a quick overview.
What is a credit score?
A credit score is a three-digit number that reflects the information in your credit report. Most people are familiar with the FICO model that generates a score from 300 to 850. A 300 is a very low credit score, while an 850 means lenders will be extremely eager to lend you money. A score of 720 or above is generally considered ‘good’.
Why were credit scores created?
Scores were developed so that loan officers wouldn’t have to actually read and understand credit reports. They are widely used and apparently the scores really do indicate the likelihood that a consumer will repay a debt. That means the lenders can trust someone with an 810 and charge extra interest for someone with a 610.
What else should I know?
The lenders get to decide what they think is a good score or a cut off score or a subprime score. And here’s something you probably didn’t know: the score you buy before you visit you visit a car dealer is not the same score the dealer will see. They get a special score based on auto deals. And if you looked at your score from all three major reporting agencies, you would see three different scores. Plus, scores can fluctuate up or down in a little as a few days.
Want to know about your credit? You’ll be better off reviewing your complete credit report, rather than just paying to receive your FICO score. You can get a free copy of your full credit report at annualcreditreport.com. It will tell you every issue you have and you can begin to work on fixing any problems you see. You can’t do that with your just your credit score alone.