Credit 101 : Finding Your Credit Score
You would think that finding out what your credit score is would be easy. In a way it is, but only because I’ve done my research and you won’t have to spend time surfing websites looking for the ever elusive credit number. It would seem logical to have your credit score appear right on your credit report, but that’s just not the way it is.
At one time, your credit score was a big secret known only to financial companies and banks. With the FACT Act, legislators decided that it was important for individuals to know not only what their personal credit scores are but how they are calculated and how to improve them.
The main company who calculates your credit score is the Field, Isaac Company commonly known as FICO. They invented the concept of the FICO scores so they are the ones who are known as experts in the industry. Before we go into finding your score, let’s look at a few facts about the FICO score.
- FICO scores are your credit rating
- They range from 300-850, higher is better
- Most lenders base approval on them
- Higher scores mean lower interest rates
- FICO scores are calculated based on your rating in five general categories:
- Payment history - 35%
- Amounts owed - 30%
- Length of credit history - 15%
- New credit - 10%
- Types of credit used - 10%
- Field, Isaac Company is the inventor of the FICO score
- They have the only website offering all 3 of your FICO scores
- The median FICO score in the U.S. is 723
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Essentially, your credit score is simply a snapshot of your credit use -- it's the Cliffs Notes version of seven years of your borrowing history. In many lending situations, the lender bases its decision almost solely on your credit score. Consider your credit score the overall GPA of your borrowing history.
Now, here’s the bad news. If you want to know your actual credit score, you will usually have to purchase it. This can be done in a few ways. You can get it from one of the three major credit reporting companies: Equifax, Experian, and TransUnion. The fee isn’t a huge one – usually around $15 or $20. However, if you’re serious about growing your credit score, it’s well worth the money to be financially responsible in the end.
You can also go to www.myfico.com and get your FICO score directly from them. They will offer you a free 30 day trial membership which will get your credit score right now and then, if you wish to continue the membership, it will update the score as it rises (or, heaven forbid lowers).
If you are applying for a mortgage, here’s a little good news for you. You can find out your credit score for free! The mortgage company will base their decision and interest rate on what your credit score number is, so just ask and they’ll tell you!
FICO scores range between 300 and 850. Here’s what those scores mean:
- Over 750 – you have excellent credit and will be able obtain credit easily
- 720 or more – you still have very good credit and will be able to obtain credit easily
- 660 to 720 – this is an acceptable credit. You can still get loans, but you may pay a higher interest rate
- 620 to 660 – creditors are going to be uncertain about lending you money
- Less than 620 – you have poor credit history and will probably not be able to obtain credit on your own.
Knowing the above information makes it obvious that if you need or want to get credit for something, the higher your score is, the better your chances are to not only get credit but get it at a handsome interest rate. If you are in the 660 to 620 range, you may still get a loan, but the interest rate is likely to be higher. That’s why it’s important to keep your credit good or establish good credit from the get go. That’s where we’ll start.
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