What is a Credit Score?
From the moment you began your financial life, your financial information and history has been collected and stored by credit bureaus. Today, there are three major credit bureaus: Equifax, TransUnion and Experian. The information they collect is analyzed, dissected, and finally translated into a "credit score."
Credit scores (also called "FICO" scores) are used by lenders to determine creditworthiness. While each lender has its own system of rules for approving or denying loans, credit scores play a large role in their decision.
Credit scores help guide lenders in determining the level of risk of potential borrowers. The higher the credit score, the lower the risk - and the more attractive the borrower is to the lender. The lower the credit score, the more difficult it may be to secure credit. Other factors are attributed to credit scores, including whether you receive a high or low interest rate.
Your Key to Credit and More
Companies other than lenders may request to review your credit report. These include current employers, prospective employers, licensing agencies, and even potential landlords. Your credit report can be used for a variety of reasons. With so much riding on your credit score, it's important maintain a good score, as well take steps to ensure its accuracy. An annual credit report review is recommended to ensure accuracy and to check for identity theft.
A Matter of FACT
It's easier than ever to receive a copy of your credit report. A called the FACT Act, or the Fair and Accurate Credit Transactions Act, was written in 2006 to provide U.S. consumers a free annual credit report from each of the major credit bureaus.
You can also receive a free credit report under the following circumstances:
- Denied credit or turned down for a job or apartment in the past 60 days.
- Unemployed and currently seeking a new job.