Your credit score is simply a number generated algorithmically that is used by the credit card companies to evaluate your likelihood of being able to repay debt. There are several scoring models with FICO (the acronym is for Fair Isaac Company, the creator of this model) being one of the most popular, with VantageScore becoming more popular in recent years. In fact, several credit companies now give you access to your FICO score as part of the services they provide.
Credit scores typically range from 300-850, and a higher score indicates a much greater likelihood of repayment on behalf of the borrower.
What is my Credit Score based on?
Your credit score is a based on a combination of factors, listed in order of highest impact to lowest impact, these factors are: payment history, your credit utilization – how much credit you have used compared to how much you have available, whether you have any derogatory marks, your credit age, how many accounts you have, and how many credit inquiries you have.
Why is my Credit Score Important?
Your credit score is important because it is a tool used by banks when deciding to lend money or extend credit to an individual. The idea of the score is to make it easier for banks to evaluate when a customer is more likely to repay their debts. For example, someone with an 800 credit score has received this score because they have paid their bills on time and utilized credit responsibly (all their credit accounts are likely not maxed out) for a number of years; a bank in this instance would be more likely to extend credit to this person because of their good credit history.
How can I check my Credit Score for free?
Although you can request your credit report for free once a year from each credit bureau (through annualcreditreport.com), this service does not provide your credit score. Some credit cards allow you to see you credit score as part of the services they offer you; Discover is one card that has historically provided access to your FICO credit score. Likewise, if you have American Express, Citibank, Chase, or Bank of America credit cards you may be able to access your FICO score. In fact, some of these companies provide your FICO score on the monthly statements.
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