Understanding Your Credit Score|
by Gage Wazein
Are you ready to apply for a loan? Obtaining a loan is
one of the biggest financial steps you will take. It not only
effects your current financial situation, but also will
have an effect over the term of the loan. Make sure you
are prepared before you make your loan application. By
taking a few simple steps, you can get the best loan
possible for your current situation.
To more efficiently achieve success with your loan, it is
important to know your credit or FICO score before you
apply. The accuracy of your score is just as important as
learing your score itself. Appropriate reasearch will
prevent any unwelcome surprises at application time as
well as allow you to correct any errors that may effect your
There are three major credit-reporting agencies. They are
known as Equifax, Trans Union and Experian. As stated
before, accuacy is imperative. Because not every agency
carries identical reports, it is important to obtain a copy
from each one.
What exactly is your credit score? Your credit score is a
number derived from a pool of information consisting of
bill payment history, how many and what type of accounts
you have, any record of late payments, collection actions
taken against you, the age of your accounts, and all your
outstanding debt. Creditors then apply a statistical
program to your information as well as the information of
your financial peers. Your actual credit score number is
then extracted from a system that awards points for each
factor you have that helps predict your likeliness to repay
said loan in a timely manner. Thus, the more points, the
better your score and the better your probability of
In more recent years, lenders have started relying a number
called your FICO score when considering you for credit.
Similar to the information obtained by Equifax, Experian or
Trans Union, FICO is mathematically generated based upon
your credit report. This generated number is then compared
to millions of other consumers resulting in a very accurate
assesment of your financial strenght and competence. Just
as your credit score, the higher your FICO score, the
better your chance of earning loan approval.
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