Credit Scores Is Important For Lenders
If you are thinking about applying for any type of financing, from credit cards to lines of credit, it is a good idea to know what your current credit rating is. Doing so will help you to improve your rating and ensure that your application is not turned down.
When you receive your monthly statement, there is one piece of information that lenders check on to make sure you are a responsible consumer: your credit report. A credit report is a numerical representation of your entire credit history. Lenders use that number to evaluate your potential credit risk – in other words, the higher your score, the lower your likelihood is of getting approved.
Credit rating agencies, or agencies such as Experian, TransUnion, Equifax and Dun & Bradstreet, create these reports. They then use a scoring method called Fair Isaac Corporation (FICO) to calculate an individual’s creditworthiness. Credit reports are maintained by the three agencies for your information. In addition, there are several other agencies such as Fair Isaac and the NCUA that provide similar information.
When you apply for a loan, a credit report is typically required along with your personal information, such as name, address, social security number, and previous addresses. You may also have to supply a bank account number and routing number. If you have any bankruptcies, it is important that these are reported as well. The reason is that many lenders look at bankruptcies as a negative mark against a credit report.
There are different methods that credit ratings are determined; the three most popular include the FICO score, which are an industry standard; the TransUnion score, which are based on the financial records of over 20 million people; and the Experian score, which is based on an average of all three. It is important to understand how each of the three scores are calculated.
The FICO score is derived by evaluating every item on your credit report. Your score is based on how much money was spent on your account, how many accounts you currently have open, and whether or not you currently have credit card debt. that is in good standing. By keeping these items on your report, it is possible to avoid paying a high score due to high balances on credit cards, car and home loans, personal loans, and other unsecured debt. In addition, you can keep a low score if you pay off your balances or other outstanding balances in a timely manner.
The Bureaus follow the same procedure as credit reports. They use a rating scale to determine a person’s score. This scale is also based on how much money is used to purchase a particular item, how much is owed on bills and the amount that is still owed.
Because the FICO scale is based on the same data, there are differences in how the Bureaus calculate each individual’s score. For instance, credit reports do not always give a full account of your financial activity, thus the FICO scale can differ by as much as 200 points. It is important to be aware that the calculations are not exact, but they are based on an accurate picture of your financial information.
Experian, TransUnion, and Equifax all have web sites where you can view your credit score in different ways. These three credit reporting companies do not publish their scores because they believe they are confidential.
If you would like to know more about your current score, you can go online and get a copy of your credit report. The three credit agencies that do provide you with this service are TransUnion, Experian, and Equifax.
The three credit rating agencies have become increasingly popular for credit reports as a means of assisting consumers who are in need of a lender that is reliable. They allow you to see what your score actually is, and what your credit may be, in light of your current financial standing.