What Your Credit Score Says About You

For a three digit number, your free credit score sure can say a lot about you to the world. Since banks and lenders look at your free credit score when you request a loan, it can have a huge effect on your major buying decisions. Buying a home, getting a car, refinancing - if your free credit score is too low, you can kiss those things goodbye.

Lending institutions have to examine your free credit score and financial history to determine whether they should risk loaning to you. The higher your score, the lower a risk you are for missed or late payments. Also, high scores give financial institutions wiggle room when it comes to fair interest rates.

So what is a free credit score exactly and who or what determines what yours is? First off, free credit scores are determined by the big three credit reporting bureaus, such as Equifax or TransUnion. That means you technically have three distinct free credit scores, though all should be around the same number.

These agencies determine your free credit score by examining a variety of factors about your credit history. Debt to income ratio and credit availability are the big factors. Late or missed payments, bankruptcy claims, disputed debt and more also factor into your free credit score.

Taking all this information into account, the big bureaus then assign you a free credit score - which is really like a grade. The highest you can hope for is 990, but consumers with perfect scores are hard to come by. In fact, not every agency’s free credit score measurement is as high as 990. Some stop around 850.

Whatever the highest score is, you want to get as close to that as possible. A free credit score of 725 or higher will get you approved for a loan. It should also earn you low interest rates. What is considered a good free credit score can change with the economic climate as well - the tougher the economy is, the tougher lenders will probably be on approving loans.

Your free credit score paints a picture of you as a consumer to any company pulling it. It gives them an idea of how responsible you are with your money and paying debts. It even gives them an idea of how early on you began building up your credit, or if you haven’t at all! You may even have to allow potential employers to pull your free credit score and history nowadays.

Staying informed of your free credit score and report is important given the major effects it can have on your life. There are plenty of free services to use, if you do your research and find the ones that are truly free. No matter what, you should pull your credit report and score at least once a year, to make sure there are no mistaken issues in it. This will ensure there are no surprises waiting when it’s time for you to get that new car or home.

Written by Rodger Strouden on August 24th, 2009 with no comments.
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