Credit Score A-Z
Your Credit Score is the most curtail part of your credit report, and is the single most important number in your financial life!Your Credit score is “your grade mark” for how you behave financially. It estimates the risk of lending you money or providing you a service, and determines how much you pay for your home, car loan, credit cards, insurance and much more.
When you apply for a loan or a service, your credit score is taken into account, along with creditors’ individual cut-off points and underwriting criteria. If you have a low credit score, you may be subject to higher interest rates and less appealing terms.
Credit Scores What They Mean
Most credit scores estimate the risk a company incurs by lending a person money or providing him/her with a service. More specifically credit score try to predict the likelihood that the person will make payments on time in the next two to three years.
Credit Past + Credit Present predicts Credit Future
Generally, the higher your score is – the less risk you represent to a lender or a service provider.
When lenders review your credit reports and scores, they take into account not only how much you owe but also how much credit you have available to you. Too much of either, and they may not loan you any more money.
Credit scores can be purchased along with your credit reports. There are over dozen different credit score in use today for various evaluation purposes, but the score most commonly used by lenders remains the FICO score, developed by Fair Isaac.
Credit score ratings systems has been in place since the 1950s, and became prevalent during the 1980’s as a way for lenders to quickly evaluate a potential borrower’s creditworthiness. The system was found to accurately predict financial risk over time and grew to several different industries.
How does my credit score affect me?
Most people fail to understand the extent to which their credit score really impacts them, especially if they are carrying high balance debts.
Take a look at the following table:
| Credit Score | APR | Monthly Payment | Total Interest Paid | |||||
|---|---|---|---|---|---|---|---|---|
| 760 - 850 | 3.25% | $435 | $56,600 | |||||
| 700 - 759 | 3.473 % | $447 | $60,920 | |||||
| 680 - 699 | 3.65% | $457 | $64,520 | |||||
| 660 - 679 | 3.864% | $469 | $68,840 | |||||
| 640 - 659 | 4.294% | $494 | $77,840 | |||||
| 620 - 639 | 4.84% | $527 | $89,720 | |||||
| Based on National Interest Rates for a 30-Years-Fixed home loan, as of 4/1/2016 | ||||||||
Say, for example that you have a mortgage with a principal amount of $100,000. If your credit score is not so good, say 630 – then you are paying almost $30,000 more than what you would with a fair score of around 700.
The difference balloons to hundreds of thousands of dollars if your score is lower! And the same applies to your auto loan, credit cards, insurance and much more.
sense – it makes Dollars!
Here are some more invaluable credit score topics:
What Are Credit Scores – A comprehensive guide on credit score ratings.
FICO Score Rating – Learn all there is to know about the most commonly used credit score rating from Fair Isaac.
Factors Excluded From The Fico Score Formula – What won’t hurt your FICO score.
Understanding Fico Scores – A dipper drill down into the different versions of FICO scores, explaining many FICO misconceptions.
How Often Do Fico Scores Change – On what schedule do the credit bureaus update your Fico score, and how often do you need to monitor it?
Free FICO Credit Score – Looking for a free fico credit score but keep hitting a dead end? Read This!
FICO Score Estimator – Get a sense of what your actual FICO score is with a free FICO Score Simulator from FICO®, the most trusted name in credit scoring.
Vantage Score – Learn about the new credit score rating from the 3 major credit bureaus – Equifax, Experian and TransUnion, and how it can help you.
FICO Expansion Score – A new credit risk score from Fair Isaac, designed specifically for a growing market of people with little or no credit history that fail to receive a traditional FICO score.
FICO 08 / FICO8 – A look into the latest versions of the classic FICO scoring model, introduced on January 2009 by Fair Isaac.
Credit Score Range – A summary list of the most common credit score ranges, followed by a graphic illustration of credit score scale.
FAKKO Score – An un-official term that refers to a Fico score that was purchased anywhere but myFico.
Beacon Credit Score – A look at Equifax’s version of the classic Fico credit score. It is similar to Fico but not identical.
Credit Karma Score – A look into the San Francisco based company that provides free credit scores to consumers, as well as other free related services such as credit score simulator and free score monitoring.
Auto Loan Credit Scores – How do they differ from classic credit scores and how to use this information to your advantage when you buy a car.
Credit Based Insurance Scores – What are Insurance Scores, and how do insurance companies use them to determine your insurance terms and premiums (Part 1).
Insurance Credit Scores (Part 2) – Continued from part 1 of Credit-Based Insurance Scores.
What Are Good Credit Scores? – People are concerned about their Fico score, and for a good reason. They keep asking what a good credit score range is, because they understand that their credit score has a huge impact on their financial life. Read more about it.
Average Fico Score (As of 1/31/2017) – Average US Fico Scores by state, age and some more statistical data, so that you can have an idea of where you’re standing compared to the rest of the nation.