Knowing your credit score is just one part of being an informed consumer. But even if you know the magical three-digit number, do you know what it actually means? Here is a quick overview.
A credit score is a three-digit number that reflects the information in your credit report. Most folks are familiar with the FICO model that generates a score from 300-850. A 300 is very low, while an 850 means lenders will be extreamly eager to lend you money. A score of 720 or above is generally considered ‘very good’.
Scores were developed so that loan officers wouldn’t have to actually read and understand credit reports. They are widely used and apparently the scores really do indicate the likelihood that a consumer will repay a debt. That means the lenders can trust someone with an 810 and charge extra interest for some with a score of 610.
Of course the lenders get to decide what they think is a good score or a cut off score. And here is something you probably didn’t know: the score you have before you visit a car dealer is not the same score the dealer will see. They get a special score based on auto deals. And if you looked at your score from the three major reporting agencies, you would see three different scores. Plus scores can fluctuate up or down in as little as a few days.
Want to know more about your credit? You will be better off reviewing your complete credit report, rather than just paying to receive your FICO score. You get a free copy of your full credit report at www.annualcreditreport.com. It will tell you every issue have and you will be able to start work on fixing the problems you see. You can’t do this with just one of your credit scores alone.