Your credit score is the single most important factor used by banks and other lenders, when they are deciding whether to give you a loan, mortgage, or credit card. Your credit score also directly effects what your interest rates will be on that loan, which can end up costing or saving you thousands of dollars. Read on to learn more, and find out how you can instantly check your score online.
Types of Credit Scores: FICO, Equifax, TransUnion, and Experian
As the demand for loans, credit cards, and mortgages continues to increase, lenders continue to greatly rely on credit bureaus to provide assistance with the decision making process. These bureaus use your previous and current financial activities to determine your likelihood of repaying a new loan. This allows the lender to adjust interest rates to compensate for the risk involved in individual loans.
There are four main credit bureaus: FICO, Equifax, TransUnion, and Experian. Each company uses a slightly different formula to determine their scores, so it is important to know your score with each bureau. FICO is the most commonly used bureau by banks when it comes to mortgages. This score ranges from 300 to 850, with the majority of Americans residing somewhere between 600 and 750.
Danger: Watch Out for Fraud, Errors, and Out-of-Date Information!
Nearly 80% of all credit histories contain errors, fraud from identity theft, out of date entries, or other factors that can negatively effect the victims financial standing. This is why it is so important to frequently check your own report, and notify the responsible bureau so that they can quickly fix the problem.