Understanding Credit Score Rankings

What are credit score rakings?
 

   
When you apply for any kind of finance, the provider will run a credit check on you to see how much of a risk it is to offer you finance. The score is based upon your financial history at a point in time and essentially checks your creditworthiness. It is usually quoted as a three-digit figure if the financial provider is using the FICO score, named after the Fair Isaac Corporation, which invented it, and ranges from a terrible 300 to an outstandingly wonderful 850. However, only about 13% of the population has FICO scores of 800 or above, and if you manage to achieve 740 or above you will get the best rates. FICO uses about 22 different bits of information on you to assess your credit score, but income is not one of them. A person on a very modest income could have a very high FICO score as credit score rakings are based on how you use your credit, whether you are a good risk for the financial provider.

Why are credit score rankings important?

A poor credit score means high interest rates for any loan or mortgage, or in the worst cases, no loan at all. A poor score may affect your ability to, have cable installed, get a checking account, buy a car, and in some cases, it could even stop you from being able to get a job. Some employers are using credit score rankings as part of their candidate assessments reasoning that someone who is in debt is not going to be concentrating on their work, or may be untrustworthy.

What should you do about your credit score ranking?

Your first step is to find out what your credit score is although the credit reference agency may use a different numbering system to FICO, they can tell you in what category you are classified. Oddly enough, if you have never before owned a credit card, or taken out a loan, your score will not be very good as there is nothing on which to assess your ability to make regular payments. It is a good idea to have at least one credit card, make small but regular purchases on the card, then make sure to pay off the balance in full each month. This activity will improve your credit score which will become important when you need to buy a house. At the other end of the scale, are those people with credit score rakings below 600; they are unlikely to be offered any form of credit at all, and will need to take some drastic action to improve their credit ranking. There are companies who specialize in improving people's credit score rakings and will advise you on the options available. Whatever your ranking number is, be sure that you know what is on your credit report and check it regularly.


  

Source: Credit Cards For People With Bad Credit Rating


 Print this page
  |     Bookmark this page