Understanding Your Credit Score Rating

By: Cameron Darwood

The credit scores and reports are defined as the tools used by lenders and financial institutions across the U.S for evaluating the financial potential of the borrower. Basically the credit reports and credit scores are determining factors for getting loans and other financial aid. Here the borrower’s previous financial history like the loans taken, loans repaid, late fines, credit card dues, bill payments and other similar factors are considered.

Agencies providing credit scores

The United States has three main bureaus for checking the credit scores and these are Experian, TransUnion, and Equifax. As per the laws of the country, all citizens can check their credit report through these different credit reporting agencies. These credits reports are based on the financial history of the borrower. The credit scores are based on different formats and FICO is the most common one used, which is the numerical expression, based on these credit reports. The FICO credit scores range from 300 to 850, with the lowest being the worst credit score.

According to U.S laws, the three crediting bureaus have to provide every citizen with a free credit report. Hence you can get three credit reports each year, which can also be checked online or they can also be applied for through mail. The borrower has to make an application for getting this report. Here the borrower may also request these reports, at different time intervals, so that they are able to get three credit reports at different times of the year.

The credit reports are not numerical expressions but contain financial details about the payments and fines of the debtor. However the credit scores are based on various statistical analyses of credit reports. These credit scores are based on numbers, which range from 300 to 850, with the scores of below 560 being considered as poor or bad credit scores. Credit scores, which range above 650, are considered to be good credit scores.

Who is entitled to check these credit reports?

The citizens of the United States are entitled to check their credit reports and get a free credit report from each of the three bureaus. Getting credit scores often requires additional charges, but there are many websites, which can provide these details for free. The lower your credit scores, the higher are the chances of not getting lucrative loans or financial aid. Poor credit scores put the lender at risk and hence they charge higher rates of interest for their loans.

There should be regularity in checking of credit reports

Usually there are no restrictions on checking your credit scores, but there are charges for checking these reports too often. In this reference, it is suggested that you should ask for free credit reports at different times of the year, so that you are able access these details frequently, and that too without paying any additional charges for the same. This would help you to manage your finances better and maintain good credit scores as well as reports.

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Being aware of how your credit score is calculated is essential. Understanding how this rating works will help you to read your credit score effectively.

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