“Hey Dad, what’s my credit score?”
That’s something you should know, kids:
Your credit score determines if you are a credit risk to a lender. They want to be reasonably sure that if they lend you money they are going to get that money back, with interest. And in some cases, a “whole lot” of interest. The riskier you look on paper, the less likely you will be approved for credit. However, if you do get approved, you can expect to pay more than someone with a higher credit score for the same loan.
Your credit score is used to determine so many different things:
· Approval on car loans, home loans, personal loans, credit cards
· Interest rates charged on car loans, home loans, personal loans
· Deposit/Down Payment on apartments, utilities, cell phones, auto loans
· Insurance premiums for auto and homeowners’ coverage
· Approval to rent an apartment
You should never go anywhere, seeking a loan or credit, without knowing exactly what your credit score is. People have been misled to believe that their score was bad, therefore being charged a higher rate, when in fact their score was good. This situation puts more money in the lender’s pocket and less in yours. Know that this practice is widespread. When it comes to your credit score, “ignorance is not bliss”.
When you know that you have a good credit score, it should give you the confidence to challenge any rate presented to you. “Is this your best rate? Why is my rate higher than the advertised rate?” These are legitimate questions. Sometimes you have to be prepared to walk away from situations that seem to not be in your financial best interest.
In 1989, the FICO score was introduced. The name derives from the Fair Isaac Corporation. It is a three-digit number, typically on a 300 - 850 scoring range, that tells lenders how likely a consumer is to repay borrowed money based on their credit history. FICO scoring models are popular with many lenders; however, the Fair Isaac Corporation is not the only service that provides credit scores. VantageScore is another common credit scoring model and FICO’s main competitor. Know that your scores can vary between different providers, due to the difference in weighting on the scoring factors.
What are the FICO credit score ranges?
As mentioned in the “Did You Know?” section of this site, you have the right to request one “free” copy of your credit report each year from each of the three major consumer reporting companies (Equifax, Experian and TransUnion). This is the official site, authorized by the Federal Government, for you to get your free reports:
Many credit card companies offer your credit scoring on their websites and mobile apps. They will also display the details that impact your credit score (on-time payments, credit used, total debt, available credit, recent inquiries, oldest credit line, new accounts, total debt) and what steps you need to take to improve your score:
CITI VISA - FICO Score
CapitalOne - CreditWise (Vantage Score)
Fidelity Visa Signature - Experian VantageScore 3.0
The important thing to remember is, “know before you go!”