Credit Card Inform

Your Credit Score

What is a Credit Score?
A credit score is a three-digit number based on a borrower's bill-paying history and debt profile and statistical information about other borrowers that lenders use to determine the likelihood of certain credit behaviors, including whether you will pay on time.

Your credit score is key information that you need to have a complete understanding of your credit profile.
Your credit score will have an important impact on the interest rate you will pay to borrow money.
Knowing your credit score allows you to question the accuracy of the score and to negotiate the best rates with lenders.
A credit score is not included in a consumer credit report and must be purchased separately.

A consumer credit reporting agency must sell you a credit score but can charge you a reasonable fee. Increasingly, credit scores are being used for purposes other than determining whether you will default on a my credit score loan or make late payments. For example, some insurers are using low credit scores as indicators to identify individuals they believe are more likely to make claims against their insurance policies. These insurance companies maintain that there is a correlation between poor credit and filing multiple insurance claims. There have been challenges to these practices and legislative attempts to ban this practice. Nonetheless, the practice persists. An accurate credit score can make the difference not only in interest rates charged on loans, but also on the availability and cost of insurance, an important essential for most families

How is my credit score calculated?

Your credit score is calculated by using mathematical models that analyze your creditworthiness. The models consider the amount and types of debt you owe and then analyze and compare your repayment history with thousands of other consumers to arrive at a credit score.

Some important factors in determining your credit score include your previous payment behavior, how much you owe, how long you have held outstanding credit, whether there are a lot of inquiries in your file from prospective lenders (except if you are shopping for an auto loan or a mortgage within a short period of time), the type of credit you use, and how much credit is available to you.

One of the most important factors in your credit score is how much of your available credit you are using. Your credit scores can be lower than they should be when credit card companies do not report the credit limits on your accounts. When credit limits are missing, most credit scoring systems substitute the highest balance for the missing credit limit. This will lower your credit score because it will appear that you are using all of your available credit even when that may not be true. Make sure that you deal only with credit card companies that report credit limits on your accounts.

What do the credit scores mean?

The higher the score, the better your credit rating. In general, a credit score can range from 300 to 850. Most scores fall within the 600s and 700s. The boundary between a standard loan and a higher cost loan, also known as a sub-prime loan, is generally considered to be a credit score of 620. A higher credit score generally means you will have an easier time obtaining credit and you should be able to get credit on better terms and at a lower cost than someone with a lower score.