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Credit Scores and How They Work

They say the best things in life are for free and a free credit report may be the next best thing for you if you are planning on getting a loan, buying a car or a house, and even renting an apartment. By virtue of the law, you are entitled to a report for free once every twelve months. Your report is important because, when summarized, it turns into three digits that can make or break your chances for a loan, insurance, rent, etc. You build up your report over the years through almost every activity that involves finances such as opening accounts and paying bills.

Your report contains information about how creditworthy you are such as the history of your bill payments. Along with other information, a creditor will summarize it into a three-digit number called a credit report score. This credit score will give a lender an idea how much of a risk you will be. This means that, using the score, they can ผลบอลสด predict to an accurate degree how you are likely to repay a loan. A high score means that you are creditworthy and a low score means that you are a high risk.

This score used to hidden from consumers. It was only lenders and other businesses that have access to the scores because they are the ones who are using it. For the developer of the score, Fair Isaac and Company (FICO), the scores would only confuse consumers. FICO feels that the scores were very technical and would make no real sense to ordinary consumers. During that time, there was nothing to tell consumers what credit scores meant or what lenders need it for. It was only in 2001 that these scores became available to consumers due to pressure form the U.S. Congress and industry and consumer groups.

Today, scores can be viewed by consumers from credit reporting agencies and credit monitoring services. There are three major credit bureaus namely Equifax, Experian and TransUnion. Although there are various ways to compute report scores, most credit bureaus use the FICO method. The three major credit bureaus and FICO worked together in the1980s to develop a method that can be used to compute for a consumer’s credit report scores. This partnership resulted into the development of the FICO method. If you want to have a good credit score then you should also have a good credit report. This means that you need to pay your bills on time and in full as much as possible.