If you have ever applied for a car loan, mortgage, or even looked into an insurance policy – you’ve probably heard about your credit score (sometimes called your FICO score).
But what exactly is it, and how does your history and decisions affect it?
Your credit score is a three-digit number (with approximately 900 being the high end), used by lenders in evaluating your “creditworthiness.” Each lender establishes their own guidelines for what they consider to be a “good” score versus a “bad” score. Individuals with lower credit scores often pay higher interest rates on mortgages or credit cards because they are viewed as riskier borrowers.
Your credit score is based on numerous factors, such as:
- Length of credit history,
- Payment history,
- Total amount of debt owed,
- Amount of unsecured or revolving debts (credit cards, lines of credit, etc.),
- Number of inquiries (times a credit grantor requests your credit report – basically each time you have applied for credit), and/or
- Public records, judgments, bankruptcies, repossessions, etc.
Copies of your credit report and information on your credit score can be obtained from the reporting Credit Bureaus for a small fee.