Credit Score

Now that the holidays and year end parties are over, it's time for everyone to get back in the routine of their daily lives. Since all the holiday parties and gifts purchased carry extra expense, that usually becomes due with January's credit card bills. So this week I will shed more light on how the credit system works and what makes up your credit score.

First, your credit score is a number based a statistical analysis of all your credit information designed to represent your creditworthiness. This means the perceived likelihood that you will pay your debts in a timely manner. Most of the information will come from credit bureaus or credit reference agencies. There are three primary credit bureaus - Equifax, Experian, and TransUnion.

You may be curious on how your credit score is used. It is the primary method used to determine whether to offer you credit when you apply for a credit card, or get financing when buying a vehicle or consumer product, or go to a bank for a loan, or obtaining or refinancing a mortgage. It will also likely be used to determine the terms offered and the interest rate you will pay. This will make a huge difference in the total cost of the credit offered, or how much you will pay in total until the entire loan is paid off.

It is also being used now for other purposes, such as by insurance companies to determine whether you would be a good risk for auto, home, or business insurance. So, whether you realize it or not, your credit score has affected you in some way virtually any time you pay for something using credit or even make a major financial purchase.

Credit scores are often called FICO scores because most credit agencies use software developed by Fair Isaac and Company. These scores will range from 300 - 850. The higher the credit score, the lower the risk. Many companies will have a cut off, like 650, that if the score is lower than the cut off, you either won't qualify for the loan or service, or the interest rates charged will be significantly higher. But there are usually additional criteria used as well. 73% of Americans have a credit score of 650 or higher.

There will be more on credit scores this week. Stay tuned ...

Now when a man works, his wages are not credited to him as a gift, but as an obligation. Romans 4:4 (NIV)

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Email: DeltaInspire@panama-vo.com