Why is understanding credit report score so important? Anytime you're about to make a major purchase you hear "do you know your credit scores".
Perhaps you know your scores already, but it still a good idea to grasp exactly what they represent. Understanding these scores is like taking your temperature with a thermometer. That figure helps you know how the lenders will look at you. So let's take the credit thermometer out of our tips bag and check our credit temperature!
As mentioned in tip #1, knowledge is power, several years ago a company designed a way to foresee who might have financial problems in the future by analyzing the data on a person's credit report.
Today this procedure is licensed and followed to determine a persons creditworthiness. By using this procedure, a score can be figured to measure a persons ability to pay their debts. There are different terms used to identify this score. You may hear it called the FICO score, or a BEACON score, and finally an EMPIRICA score.
Well, before such scoring came into being, you were considered to have great credit if you didn't have too many bills and paid them on time. Today it's different. Now that a number is applied to the person applying for a mortgage or a car loan, that number or score can make a difference in success or failure. If you have too many trade lines, you may have a lower score, even when you are scrupulous about paying your bills promptly.
The procedure is called the Fair Isaac algorithm. You can be "marked" as risky with this procedure of forecasting while being a good bill payer. The score that is generated measures this about you. Interestingly, a person who has filed for bankruptcy three years ago may appear better than you if they now have a higher score.
How is that?
The person who has filed for bankruptcy three years earlier has no debt. Time may have allowed their score to improve. Perhaps they would like to buy a car or a house. These particular debts are secured by the property or the vehicle. Thus the lender may look at situation and consider them a good risk, since they can repossess the items if the person defaults.
Whereas, you have credit card debts on your report. These may give you a lower rating. So you may have difficulty appearing creditworthy for the loan your trying to qualify for, unless you go through the process of financial repair.
Once a year you can obtain your report from the three agencies for
free, but it may not have your scores on it. Some of these agencies will
give it to you over the phone, but the others require a fee to give you
Many companies that offer you a free credit report want you to pay to see your scores. So take this step and get a copy of your credit scores even if you have to pay a small fee for them. It's worth it! In the process you get the credit report, you need all these to begin your repair process yourself.
Finally, if you have recently been denied credit, you are entitled to a free copy of your report. Be sure to take advantage of this opportunity!
How can you boost credit rating without understanding credit report score in the first place? Therefore, you must know your scores.
Proceed to credit repair tip #4 next.
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