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What about Credit Scores?One of the reasons a credit report is established in your name is so that bureaus can calculate your credit score.
Your score is a number from about 300 to 850 that gives companies a snapshot of your money habits. If you apply for an instant-approval loan, the loan officer will likely contact a credit bureau to find out your credit score. This number will give the officer an instant idea of how good your credit is. If your credit score is 800 or above, the officer will know that you have an excellent track record of paying off your loans and will likely offer you a good interest rate on a loan.
The exact method credit bureaus use to calculate credit scores is a closely-guarded secret. However, it is known that algorithms and complex ma
thematical formulas are used to translate your past debt habits into a number. Since each credit bureau works with different partner companies and different mathematical formulas, your credit score may be different at different credit bureaus.Why is My Credit Report Important?If you apply for a job, an apartment, or a loan of any kind (including a credit card) your credit report and credit score will be very important. When you hand in your application for these things, someone checking your file may contact a credit bureau in order to learn more about you. The information in your credit report can affect you in many ways:
- It can affect your job. If you apply for a job that requires financial responsibility, your employer may check your credit report to see how good you are with money responsibility. A poor credit score could suggest that you are not careful with money and could hurt your chances of getting a job.
- It can affect where you live. Today, some condo and apartment building owners are checking the credit score of each potential resident to determine how regularly they can expect payments. If your credit report shows that you are tardy with bills, you may have a hard time getting the homes that are most in demand, since building owners and superintendents will be seeking residents who are likely to pay their bills on time.
- It can affect your ability to get loans. When you apply for a loan, one of the biggest determining factors in your application is your credit report or credit score. If you have a good credit history, you are far more likely to be approved for a loan. If your credit is very poor, you may find it very hard to get a loan at all. If you have been rejected for a loan, get copies of your free credit reports from the credit bureaus to find out why.
- # It can affect your interest rates. Your credit history can have a dramatic impact on your loan interest rates. Since lenders see your credit history as a possible indication of how you will react in the future, they may see you are a bigger credit risk if your credit score is low. Therefore, they will likely charge you higher interest rates.
- It can affect your loan terms. In general, lenders will offer the best terms and loan services to clients with high credit scores and good credit. Since lenders can be reasonably sure that these clients will pay what they owe, they wish to attract these clients with better offers.
Even though you may have never seen your credit report, it has a dramatic result on your current finances. If you do not know what is contained in your current credit report, you will certainly want to contact a credit bureau to find out how your past credit may be affecting you today.
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