CREDIT SCORE: What’s Your Number?
Businesses of all kinds use your credit score to make decisions on the amount of risk they are willing to accept in extending credit. Most creditors don’t just use your three-digit Fair Isaac Corporation (FICO) credit score; they also review the details of your credit history listed on the credit report. FICO scores range from 300 (bad credit) to 850 (excellent credit) with 60 percent of the scores falling between 650 and 799. According to FICO, the median credit score is 723.
Each consumer’s FICO score is constructed from credit scores of the three national credit bureaus — Experian, TransUnion, and Equifax. The scoring model used by FICO combines the database of each of these three credit bureaus into one score that represents the same credit risk to lenders regardless of which bureau is accessed.
But, a good credit score doesn’t guarantee the borrower will pay back all funds on schedule just as a bad credit score doesn’t guarantee they creditor will never seen their money again. The credit score is simply an estimation of the credit worthiness of an individual.
More importantly, a credit score evaluates a borrower’s ability to repay debt (meaning even with a good credit score, a borrower might be denied credit). This can happen after the reviewing the borrower’s income, assets, and liabilities, the lender feels the borrower’s ability to repay the loan would be drastically reduced when compared to credit extended in the past.
Check your credit report once a year to ensure it is correct. Errors left ignored can cost your FICO score points and thousands of dollars in interest that you shouldn’t have had to pay. Also, your three-digit number is your protection against being denied credit when you really need it. What’s your score?