2023-08-13 20:40:36
Have you ever been denied a loan and you don’t know the reason? Financial institutions are based on different parameters to grant this type of benefits and one of them is the credit score, but what is it and how can you know yours?
This rating can determine risk of financial organizations to grant you credit cards, car loans and mortgages. In addition, this can have an effect on the credit terms that you are offered.
Having a higher credit score means that businesses perceive you as lower financial risk, raising the likelihood that you’ll be awarded one or pay less in interest.
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what is the score credit?
According to the Federal Trade Commission, it is a credit score that represents the rating of your level of probability of repaying a loan and punctuality when paying it. Lenders calculate your credit score using information from your credit report, such as your past loan payment history, the types of credit you’ve obtained, how long you’ve held a particular line of credit or loan, and what the total amount is of his debts.
How is it calculated?
Each credit scoring system calculates your score in a different way, but the most widely used credit scoring system by most lenders is called a FICO score. Various types of businesses use your credit score to decide if and on what terms to extend credit to you. That includes what interest rate you’ll pay to borrow money.
As measured?
The numbers used to measure the score are between 300 and 850 points. To determine the grade, the score measures variables such as:
Ability to pay: the money you have free after paying your fixed expenses. Punctuality of payments. Default: the probability that you do not make a payment, based on your history. Credits: if you have or have had credits and how was your behavior with them. Debt capacity: how much you could borrow with a loan or how much credit you are using. Bankruptcies: how many times you have stopped paying. Settlement: it is included if you ever settled a debt and paid less than the amount you owed through of any deal between individuals.
A high score means that you have good credit and reflects that institutions and businesses consider that getting credit represents a low financial risk. With a high score, you may be more likely to get credit—or pay less for a loan, credit card, insurance.
On the other hand, a low score means you have bad credit, which can make it harder for you to get credit. With a low score you are more likely to have to pay higher interest rates when you get it.
How can I find out what my score is?
Contrary to the annual credit report, credit score is not annual or freebut you can request yours from a credit reporting company.
Other companies also provide free credit scores if you sign up for their paid credit monitoring service, which checks your credit report for you. However, it is not always clear if you will be charged for the credit monitoring service, so it is important to read the terms and conditions.
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