When you apply for credit, lenders determine your credit by examining your credit scores, also known as the FICO score.
You should know that your prospective employer, your insurer and your landlord also look at it.
The FICO Scores are developed by the Fair Isaac Company.
It is important because it affects how much money you can borrow? What kind of interest you will pay? Finally, what perks you are entitled tofrom your credit card company.
FICO Scores range from 300 to 850. The higher your score, the lower your perceived risk to a lender.
You really want to get beyond 750. Under 650 is bad. That is considered subprime.
So what kind of data do credit reporting agency collect from you?
Your payment habits, where you live and work, and whether you get into legal trouble.
There are THREE Credit Reporting Agencies. Equifax, Experian and TransUnion.
Here is how they calculate your score?
Are you paying on time? How much debt do you have? How long have you established your credit history? Have you applied for new debt recently? And the different types of debt you have.
Because of how important this is, you should always check your report for accuracy. You are allowed one FREE report each year. Download report at www.AnnualCreditReport.com.
Check for inaccuracy of data, fraud, identity theft, questionable information release to outside parties, and where necessary,fix and negotiate reprieve for missed payments.
This is super important. Negative records can stay on for 7 years. Chapter 7 Bankruptcy, 10 years.
Finally, it is important to form good financial habits. Your credit is GOLD.
Thank you for watching Financial Wellness Tower’s FICO Score video. Start the learning and the wealth will follow.