Secrets of Credit Score Part 2

Credit scores have proven over time to be a reliable indicator of whether or not a consumer would repay a loan. Credit scores allow lenders to quickly make on-the-spot credit decisions based on a 3-digit number that sums up your credit worthiness. There are many credit scoring models in use today; all are designed to rate your likelihood to repay your debts. Credit scores are derived from credit reports, so it is vital that you know everything you can about credit reports.

Credit scores typically range from about 300 to 850. Consumers with high credit scores are more likely to obtain lower interest rates and better terms on loans, including mortgages, and credit cards (higher credit scores can also result in lower insurance rates). Credit scores are available as an add-on feature of the report for a fee. Credit scores are being used for everything these days, including mortgages, credit cards, and insurance and even employment decisions. Your credit score can be the number one thing that causes a credit company to say "yes" or "no" to your credit application.

Credit scores help lenders assess risk more fairly because they are consistent and objective. Consumers also benefit from this method. Credit scores are calculated based on data in your credit reports and, as fluid numbers, change over time, sometimes on a daily basis! That's why it’s so important to stay on top of your credit reports for changes that could affect your credit scores. Credit score is only one part of the equation when getting loans. The main focus should be on making sure everything in your credit report is accurate and as good as can be.

Credit scores are also weighed when you want to refinance a home loan or buy something on time. Some auto and home insurance companies will accept or reject you based on your credit score. Credit scores are fluid numbers that change as the elements in your credit report change.

Credit scores affect everything from rates on mortgages and car loans, to credit card terms and even whether you get a job. Lenders use them as an indication of how likely you are to repay a loan.

Bad credit can get you denied for basic services, such as electricity or a cell phone, if your credit report shows that you tend to pay late. Bad credit is typically associated with the inability to get new credit. Car loans, mortgages, and bank loans can be much more difficult to obtain with a problematic credit history.

Freezing your credit card or burying it in the backyard is such age-old advice, it’s practically a cliché. If your account goes dormant, the company may stop reporting it to the credit bureaus or they could shut it down completely.

FICO likes to see that you're still using credit, but doing so responsibly. FICO scores are the credit scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus: Experian, TransUnion, and Equifax.

Each credit agency might give you a different score, so check with all three to get a good idea of exactly what your score is. Banks and other lenders check your FICO score when you apply for, and use credit. Knowing your score puts you one step ahead when you apply for a mortgage, loan or other credit. Banks, mortgage companies, apartment complexes, car dealerships, realtors, and even insurance companies can get your risk in a matter of a few seconds using the FICO score model that the bureaus use to determine your credit score. Your score is so prevalent these days.

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Gurmit loves travelling; he has been over 70 countries. He speaks fluent Cantonese, Polish, Hindi, Punjabi and English. Gurmit is an author, writer, insurance and mortgage expert. He frequently writes on various topics of interest to his readers. Gurmit Singh is a licensed mortgage expert with Dominion Lending Centres Mortgage Villa.

Gurmit Singh, mba
Mortgage Expert
M08009905
Dominion Lending Centres Mortgage Villa (11574)
Email:gurmit@gurmitsingh.ca
Website: http://www.gurmitsingh.ca