| Credit scores play a vital role in a person's financial life. | | | | independent firm responsible for developing the |
| They can make or break your chance of obtaining a | | | | method of credit scoring. The FICO credit score |
| mortgage loan, a credit card and other types of loans. | | | | ranges from 300 to 850. |
| For home buyers, a credit score is important in the | | | | Not only banks and lending institutions use credit |
| home buying process as well as in determining the | | | | scoring as mobile phone companies, insurance firms, |
| lender's interest rate. | | | | employers and government departments also apply |
| A credit score is a three-digit number calculated based | | | | the same techniques. |
| on a statistical analysis of a person's credit files. | | | | A good score |
| Lending institutions including banks normally use this in | | | | The higher the number, the better is your credit score. |
| determining if a person is worthy to avail of a loan or | | | | This means that the lender believes you can be a |
| any other form of credit at a specific interest rate and | | | | good borrower with less risk. Additionally, as your |
| credit limit. The number helps lenders identify the level | | | | score increases, you will more likely be offered a |
| of risk they may be taking if they loan an amount to | | | | lower interest rate. Borrowers with a credit score of |
| an borrower. In other words, a credit score is proof of | | | | more than 700 are offered more financing options and |
| his creditworthiness or his ability to pay debts on time. | | | | better interest rates. |
| Credit information | | | | A 2003 report in the U.S. revealed that 29 percent of |
| Basically, a credit score is based on credit report | | | | the American population have credit scores ranging |
| information provided by three major credit bureaus or | | | | from 750 to 799, 20 percent in the 700-749 range, 16 |
| credit reference agencies - Transunion, Equifax and | | | | percent in the 650-699 range and 11 percent in the |
| Experian. A credit report contains information on your | | | | 600-649 range. Another 11 percent have scores of |
| payment history, how much open credit you have or | | | | more than 800. |
| the amounts you owe, the length of your credit history, | | | | Getting your score |
| types of credit used and new credit, all of which affect | | | | Previously, only lenders and other businesses that used |
| a person's creditworthiness. Apart from those | | | | the FICO could access your credit score. However in |
| information mentioned, lenders normally consider other | | | | 2001, the federal government finally decided to give |
| factors such as income, employment history and the | | | | consumers access to their scores after being |
| credit type a borrower is seeking. | | | | pressured by the U.S. Congress, credit industry and |
| Most lenders and banks use the FICO method in | | | | consumer groups. |
| calculating an individual's credit score. Many mortgage | | | | Today, anybody using credit can obtain their credit |
| lenders also use this to find out the possibility that the | | | | score from the three big credit agencies, at Fair Isaac |
| borrower may default on his financial obligations to the | | | | and Company's website and several other websites. |
| lender. | | | | Borrowers can also ask their lenders for access to |
| FICO refers to the Fair and Isaac Company, an | | | | their scores when applying for a loan. |