What Do You Know About Your Credit Score?

[Apr 16, 2008.]

 

Everyone seems to want to know your credit score these days: employers, apartment landlords, real estate agents, banks, etc. But if you’re not quite sure what this number is and what it means, you aren’t going to be able to provide the best possible answer for those that inquire. Your credit score is becoming an important part of your financial health and your financial future. Here’s what you need to know.

Also known as a FICO score (Fair Isaac Corporation), your credit score is a measurement of your worthiness as a consumer. It rates the way that you handle your finances in order to show those that you deal with financially whether or not you are a ‘good’ applicant or a ‘poor’ one.

The credit ratings range from 400 to 800 points, with 400 being ‘poor’ and 800 being ‘perfect.’ Most Americans are in the 680 point range, which means they have some credit issues, but are average in terms of their credit worthiness.

This number is determined by measuring various points of your financial history:

• If you pay your bills on time


• How much debt you’re carrying


• How many credit cards you have


• How long your credit history is


• Your record of paying back loans and installment plans


• Whether you’ve declared bankruptcy

Of course, there are other things that come into play as well, but these are the categories that most people can understand and then takes steps to improve.

What you may want to realize is that even if you have a low credit score, it can be repaired. It might take you some time to rebuild, but you can take simple steps to get your credit score back in a suitable range. And this is important for:

• Getting the best interest rates for loans


• Getting the best interest rates for credit cards


• Being approved for loans


• Getting certain jobs – Employers sometimes like to know your credit score because of positions where you will have access to a lot of money. Some employees have been known to steal money in order to help payoff a large debt load. Or an employer might like to know how you manage your money to see how you will manage theirs.

As you can see, your credit score is an important number to monitor. Due to recent regulation, you can also receive a free credit score report each year from each of the major credit reporting agencies. Simply go online to find out where you can access this free report.