How's Your Credit and What Does it Mean?
You have most likely seen the commercials telling you how to get your credit score online. There are also thousands of websites offering credit scores and help. The importance of credit and it's ability to assist in major purchase has never been more important than it is today. Whether you are looking for a car, boat, home, mattress, tv, or even a cell phone, credit is used to determine the outcome.
There are three major credit reporting bureaus (TransUnion, Equifax and Experian) and each one utilizes a different scoring method to determine your score. The most recognizable is the FICO score, which is used by Experian. EMPIRICA is the model used by TransUnion and Equifax uses BEACON. Each company differs slightly in their scoring determination, but they generally use the following :
- Balances on your credit card
- Your available credit
- The lack of credit
- Your payment history
- Length of credit
- How often your credit is checked - inquiries
- What you owe - balance
It is each of these items along with a super, computer algorithm that determine your score. These scores can range from 300 to 850 depending on the individual scoring company. Typically it is best to view all three to make sure that there are no discrepancies. Higher scores indicate you are less of a credit risk, and thus may qualify for a better mortgage rate.
There are other factors that are considered when making a credit decision including your job history, the type of requested credit, and current income. You can visit www.equifax.com, www.experian.com, and www.transunion.com. Each website will have information explaining credit and credit scoring in more detail.
Understanding what is used to establish your credit and how to maintain good credit is extremely crucial in today's economy.
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