What’s Your Credit Score?
Your credit score has been affecting your
life for years.
You may not even know that you have a
credit score. When you apply for credit
or a loan, lenders from credit card companies,
home equity, auto loan lenders, and
finance companies use the score. It is produced
with a computer model created by
Fair, Isaac & Co. (or "FICO.")
A credit score is an outline of your credit
history. A low score can mean you don't
get a credit card or a loan. Or it can mean
you will pay a higher interest rate, if you
get a credit card or a loan. Some lenders
use your credit score and other information
to set the "price" for your loan.
(35%) Negative marks
occur when you paid
bills late, had an
account sent to
collection, or declared bankruptcy. Not
paying your bills will hurt your score
more than bankruptcy five years ago.
(30%) If you have
maxed out your credit limit on a card,
this is a negative mark. A low balance
on two cards is better than a high
balance on one.
Length of your credit history
The longer your accounts have been
open the better.
Recent inquiries on your report
(10%) If you have recently applied for
many new accounts, this is a negative
Types of credit in use
(10%) Loans from
finance companies usually lower your
credit score. FICO uses this factor when
there isn't a lot of other information upon
which to base a score.
This is a guide to what credit scoring
companies see as key. Some companies
may consider extra factors.
The law states that a business cannot base
the credit score on: age, race, gender,
education, national origin, marital status,
and receipt of public assistance.
What the Numbers Mean?
Credit scores range from 300 to 900. The
average is around 750. As your score
increases, your risk of default decreases.
There is a link between low scores and
high default rates. Like your credit history,
your score varies from one credit
bureau to another.
Lenders look at three
credit bureaus files
and usually take the
How to Get Your Credit Score?
Credit scorers are not required by law to
reveal credit scores to consumers. Since
2001, consumers can secure for a fee
($12.95) their credit score.
To get your credit score, visit
Source: Nolo Legal Encyclopedia
Edited by Katherine Reuter, Extension Educator, Consumer
and Family Economics, University of Illinois Extension,Countryside Extension
Prepared by Susan E. Taylor, Extension Educator,
Consumer and Family Economic, University of Illinois Extension, Matteson
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