Credit Score A good credit score is the key to being able to get a line of credit when you need it. But many people do not understand how credit scores work and what a good credit score is compared to a bad one. You already know that credit and a credit line is when you borrow money from a lender or financial institution to purchase something of value or to consolidate your debt. These institutions use your credit score to determine whether or not you are a good financial risk.
Having and maintaining a good credit score will allow you to get the credit you need for a credit card, a mortgage, utility hook-up, car loan and any other type of financial assistance you may need. Lenders need to know what kind of risk you are to them if they take a chance on you. Gone are the days of issuing credit based on a handshake and a promise. Today, a good credit score is what will help keep you financially sound.
Your credit score is a statistical method that financial lenders use to determine whether or not you are a good financial risk and the likelihood that you will pay back the money you borrowed. Each of three major credit bureaus (Equifax, Experian and TransUnion) issues your credit score; while your final good credit score number may be close with each of the three, they all use different methods of evaluating that final number. The basic information that all three look at, however, includes your payment history, current debts, how long you’ve had credit, the types of credit you have, and how often you apply for new credit.
Credit Score. In determining whether to approve your loan, your lender will check your credit score to see if you have good credit. If you don’t have good credit, the lender might still be able to offer you a home equity line of credit under an alternative credit program.
The final three-digit number that the bureaus come up with is your credit score. The lowest the score can be is 350, which means you have bad credit and are considered an extremely high financial risk. A credit score this low will cause you to see very high interest rates if you are lucky enough to even get credit. A score of 850 means you have a very good credit score and you should have no trouble getting credit as you are viewed as a very low financial risk. Although you have to pay to obtain your credit score, the federal Fair Credit Reporting Act entitles you one free credit report at no charge per year.
Your good credit score is a fragile thing and you need to make sure you do your best not to take any action that will harm it. Getting a copy of your credit report each year can help you stay on top of what the credit companies may know about you and your credit.
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