5 Common Credit Score Questions Answered
Credit scores can make a big difference when you’re applying for a loan, job, or apartment. If you have financial goals, it is important to understand what a credit score is and how you can manage it to your advantage.
We’ve answered 5 questions about credit scores to help you understand their importance.
1. What is a credit score?
Your credit score is a mathematical assessment of the likelihood you will repay what you borrow. It is based on the information in your credit report, which tracks your credit-related activity.
In other words, it tells someone, such as a lender, how likely you are to fulfill your obligations.
2. What is your credit score based on?
Your credit score can vary based on which of the three major credit reporting bureaus you go to, and that’s because they have slightly different formulas and may consider different factors.
But in general, your credit score is based on your credit accounts--loans, lines of credit, and other obligations such as utility bills in your name.
Examples include:
For each account, your credit report shows who it is with, your payment history, the initial amount borrowed (for loans) or credit limit (for revolving credit), the current amount owed, and when it was opened/taken out.
Your report also shows if you have experienced any credit-related legal actions, such as a judgment, foreclosure, bankruptcy, or repossession, and who has pulled your report (called an inquiry).
3. Who looks at my credit score?
Lenders, potential employers, even potential landlords will ask to review your credit score and your credit report. They base much of their decisions on your credit information.
When it comes to loans in particular, the better your score, the better the chances you’ll get approved, and the better the rates you’ll get.
4. When should I check my credit score?
You should always check before you start applying for any loan. See a surprisingly low score? That could indicate you’ve been the victim of identity theft; you’ll want to contact the credit bureaus right away to dispute any fraudulent information on your credit report.
It might also be a good time to check your credit score when you already have a loan, such as a mortgage, and you know that rates have improved since you first got the loan. If your credit score is good, it might be worthwhile refinancing your loan.
SF Fire Credit Union members can check their FICO® Scores for free each quarter in Online & Mobile Banking.
Additionally, you can get a free copy of your credit report once per year from each of the three main credit bureaus (Experian, TransUnion, and Equifax) at www.annualcreditreport.com. Please note that this free report will show your credit data, but not the actual scores. But it’s a good opportunity to look for anything unusual that might be negatively impacting your score.
5. How can I improve my credit?
If your credit score isn’t where you want it to be, don’t worry. There are many options for building your credit, including opening a Secured Credit Card and establishing a good payment history.
SF Fire Credit Union members benefit from our partnership with Balance Pro Financial Fitness for financial counseling and advice on how to build or repair credit.
