consolidated debt and secured credit

The Importance of Credit Scores

Debt Consolidation and Credit Card Counseling

Contents

Credit Report Scores are Important

Credit reports should be checked regularly

Have you ever heard of a FICO score? Many consumers haven’t, but it’s a term with which everyone should be familiar, because the FICO score is an important component of having healthy credit. Here is what you can learn from your credit report and what you can do to improve your score.

Continued below
credit report - check it often

The all-important credit report and what it means to you

The Fair Isaac Corporation has formulated what has come to be known as the FICO score, the all-important three-digit figure that the three credit agencies use to determine how eligible a consumer might be for a credit card or a home or auto loan. The FICO score, in a nutshell, reduces your entire financial situation to a number between 300 and 850.

The score is derived from a complicated formula that distills information gleaned from the three main credit agencies regarding your finances, your payment history and any bankruptcy filings or late payments you may have had. The score represents an attempt on the part of Experian, Equifax, and Trans Union to quantify you into a single number. The system has been quite successful, and most consumers have no idea how often this three-digit number comes into play in their everyday lives, often for reasons that aren’t obvious on the surface.

Anyone would reasonably assume that prospective lenders would run a credit check prior to issuing a loan for a car, boat or home equity loan. After all, no one would lend money without making sure the borrower could be trusted to repay it. What would surprise most people is that the FICO score is frequently checked by prospective landlords, employers, or insurance companies. A few states have prohibited insurance companies from using the FICO score to establish insurance rates, many still use them as a guideline for establishing the risk of individual customers. Employers use the scores to determine if a potential employee might be a security risk or provide the potential of theft of company assets and managers of rental properties use the scores to establish whether or not a tenant should pay a security deposit, and how much that deposit should be.

Good arguments can be made that there is no way to accurately distill someone’s financial essence into a three digit number. Fair or not, most companies that make use of the FICO score would rather glance over that small amount of information than pore over someone’s financial history. In short, the credit score saves time for everyone.

Anyone who is concerned about their credit health should check their credit report at least once a year. Thanks to recent legislation, Americans are not entitled to obtain a credit report for free once per year per credit bureau. Consumers should check the document carefully for errors and should report any irregularities immediately. The system isn’t fair, but like it or not, you are your credit score as far as most businesses are concerned. Make sure that you do what you can to keep your score as healthy as possible.

 

 

Copyright © 2005-2007 by Retro Marketing. All rights reserved.