Credit Scores – What It is and Why It is Important

Credit scores play a very important role in a person’s life – it is a 3 digit number which is calculated based on the detailed information derived from an individual’s credit history.  It is a very valuable asset as it impacts a person’s financial future in several different ways. These scores help in deciding whether a consumer gets a mortgage or a car loan or a home loan or even a new credit card.  Credit ratings, play an important role in the rates that people have to pay on loans of all kinds – car, home and even student loans.

The higher an individual credit score, the lower the interest that one has to pay.  Credit risk is usually evaluated by referring to a person’s credit score every time they apply for a loan or credit card.  Poor credit scores have a big impact on all aspects of life – including the ability to get a job.  Credit scores are usually calculated using the same criteria by different credit rating companies – FICO is the most well known and used score.  FICO scores range between 300 to 850 and scores of 740 and above receive the best interest rates. Visit creditkarma.com to view your credit score report for free from all the three credit rating bureaus.

Why one needs a credit report?

Credit reports offer a snapshot of a person’s credit history and also a breakdown of the factors that play a role in determining credit scores.  It is common knowledge that many people have serious errors in their reports that adversely affect their credit scores. This could be because there are so many people that they have to look into and errors happening are quite common. This is why it is very important for individuals to review their reports regularly and ensure that there are no glaring errors – if there are any, it is important to dispute them.  Consumers have to get in touch with the relevant company and get the issues resolved.

A credit score will also tell you where you are standing in terms of your financial future. If you have a low score and you know it, it becomes easy for you, start implementing varied actions that can help you to improve your score. You can also talk to the credit repair companies to solve your credit concerns. They have the right knowledge and understanding and experience to handle such cases at ease.

Monitoring credit ratings are important as it will help a person figure out if identity theft has occurred and if anyone else has opened an account in their name.  Credit reports can be obtained by paying for them – the general recommendation is to check scores before applying for a loan or credit card.  Good scores always help in obtaining lower interest rates and savings over time.

How credit scores are calculated:
Credit scores are usually calculated taking into account things like:

• payment history
• amounts owed to different borrowers
• length of credit history
• amount of new credit
• types of credit accessed (store credit cards, mortgages, car loans, etc)

You can check for your free credit report every year at creditkarma.com. There are a number of companies that offer comprehensive solutions to solve your credit concerns – get in touch with them once you have the credit report with you. Instantly addressing the situation will help you to improve your credit scores soon. You could browse through forums and discussion boards to know more about these credit repair companies. Taking references from friends, colleagues and associates help to find the right credit repair service professional tremendously.