Your credit score is a judgment about your financial health, at a given point in time. It shows the risk you represent for lenders, compared with other consumers.
This is a harsh reality for many people no matter where you are in the world. It’s a fair argument to say gone are the times of just relying on good character, a steady job and proof of income. But we are living in the Now and the future. Financially speaking your credit score dictates many things from renting a home to buying a home. For some jobs, your credit is checked. It’s a scary thing, but that’s the truth folks.
There are many different ways to work out credit scores. The credit-reporting agencies Equifax and TransUnion use a financial calculation formula that is based from FICO. After all possible calculations of risk, it all boils down to a scale from 300 to 900. The higher the score on this scale is good. This really translates to: the higher your score, the lower the risk for the lender.
For example, if you apply to for a loan, the higher your credit score is, the more likely you will get approved for this loan. On top of it, you may qualify for a better rate of return interest because you were a good person, financially speaking.
Lenders such as banks or other lending companies may also have their own ways of arriving at credit scores. Furthermore, lenders must decide on the lowest score you can have and still borrow money from them. They can also use your score to set the interest rate you will pay. This is where those folks who have a weaker to poor credit score will likely be either denied all together or are expected to pay through their noses if approved for that loan.
Now this sounds almost elementary, and it is, because all the factors that make up a person’s credit score can get very complicated. The other thing is that the original FICO Formula is not available to the public, due to hefty propriety restrictions.
In any event, it is sufficient to say that your credit score is very important for your future. It can be improved over time if your score sucks, but mind you your will have allow time and careful monitoring of making repairs to your credit score.
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