Consumers are often confused about credit scores. Many do not know who makes credit scores available, what is a good score or the financial cost of a poor one.
On a recent credit score quiz administered to over 1,000 consumers only 60 percent answered questions correctly. In most test situations that is a failing grade!!
Your credit score is a number, a numerical rendition of your credit worthiness. The number indicates how well or how unlikely it is you'll repay a debt. The higher the number, the more likely you'll repay on time, according to statistics. Credit scores are very important and influence whether consumers can purchase and at what price, including mortgages.
What all consumers should know.
• The three main credit bureaus -- Experian, Equifax, and TransUnion -- collect information on which credit scores are most frequently based.
An individual has many different credit scores, which are either generic or lender-based. Generic credit scores are available from many sources not just FICO, the three credit bureaus and other websites. Most scores, however, are based on information in a credit report at one of the three bureaus.
• Most Americans have more than one generic credit score.
• Three key ways to raise a credit score or maintain a high score are making all loan payments on time, for each credit card keeping balances under 25 percent of the card's credit limit, and avoiding opening several credit card accounts at the same time.
• Many non-financial services such as insurance companies and landlords use credit scores to determine whether to offer a service and at what price.
• A large majority of consumers correctly understand the following about scores: Missed payments, high credit card balances and many applications for new accounts at one time are all factors used to calculate credit scores.
It's a lot more difficult to raise your score than it is to lower it. Making a couple credit card or mortgage payments late may take a year of on-time payments to restore one's favorable score.
• Even if you have high credit scores it is essential to comparison shop for credit. Major lenders use somewhat different criteria in their own credit scores and even when they use the same score, they may assign different risks to it.
• The value of credit repair companies is sometimes questionable. They often over promise, charge high prices, and perform services, such as correcting credit report inaccuracies, that consumers could do themselves.
All the best,