The Civil Life

The economic slowdown and bad loans have taken a bite out of everyone’s credit score. Even if your credit score hasn’t changed, you’ll find it much harder to get good terms on loans. If your credit score has been significantly lowered, you’ll find it difficult to get loans and you may be locked out of other opportunities, like nice apartment rentals. In this post, we’ll talk about what a credit score is.

The credit score is a number that is generated from information kept by credit bureaus that track your credit and payment history. This history is reported to the bureaus by the people that bill you, like the banks that you get your credit cards from. Credit scores range from 300 to 900. If you credit score is over 700 or so, you will get good terms on loans and people will want your business.

How is the credit score calculated? The two largest parts of the score are your payment history and the amount of credit you already have. If you are never late on paying bills, the better your score. Similarly, the amount of credit you can use is very important. If the maximum amount of credit you can use is too small, or if you use too much of your limit, the lower the score. Going too far in the other direction — having too much credit available will hurt you, too. The idea is to find people who have credit and know how to use it properly.

Less important parts of the score include how long you’ve had a credit history, the new number of credit applications you’ve had recently, and the types of credit you have. The idea here is to find out how consistently you use credit.

Things that are not included in calculating your credit score includes income, employment, age, race, sex, whether you are married or not, if you move around a lot or own a house, education, and if you’ve been turned down for credit.

You can purchase your credit score from the company that came up with the most frequently used score, Fair Isaacs Co., at myfico.com. The cheapest option at myfico is usually good enough — a standard score report without any membership that will drain your money over the long run. A free calculator that estimates your credit score can be found at Bankrate.com, which is useful for figuring out how to improve your score.

This entry was posted on Sunday, June 1st, 2008 at 3:15 pm and is filed under general. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.