Your Credit Score

Credit scores: all lenders use credit scores to determine interest rates and credit limits.

The credit scoring system was developed in the early 1950's. However, it was not widely utilized until the early 1980's, when it was overhauled by Fair, Isaac & Company. At that time the 3 major credit reporting bureaus, Equifax, Experian and Trans Union, worked with FICO to create three separate credit models, one for each bureau.These agencies still use their own criteria to rate credit holders but the numbers have been normalized so that a score of 650 at Bureau A is equal to a score of 650 at Bureau B, etc.

Simply put, a credit score is a mathematical equation calculated by the review of a potential applicants credit history. It is based on factors such as income, instances of late or missed payments, types of debt owed, number of credit inquiries on file and the percentage of available credit that is actually being used.

Credit scores generally range between 300 and 800. The average credit score lies somewhere between the 600 and 700 range. As a rule, in order to receive a standard, lower cost loan a score of 620 or above is required. A high score indicates a low credit risk, meaning those with high scores find it very easy to obtain credit.

It is important that credit issuing companies indicate a credit holder's limit on their credit report. Failure to do so will usually result in a lower credit score. This is due to the fact that most scoring models plug in the highest balance from another listed account, when a credit limit is missing. This is an action which causes it to look as though a greater percentage of an individuals total available credit is actually being used. To avoid this type of situation, deal only with lenders who include this specific piece of information in their bureau reports.

There is a law which requires each of the three major credit bureaus to provide you with a no-cost credit report, once a year, should you request it. There is no such law pertaining to credit scores. Credit bureaus are allowed to charge consumers a "fair and reasonable" fee, for them.

There is an exception to the law above. Consumers are eligible for a no-cost credit score when applying for any type of home loan. As long as the mortgage lender uses a credit score when making an approval determination, he or she must supply that information to each applicant who requests it.

The questions you should be asking.

1: How do I order my free report?

2: What information do I have to provide to get my free report?

3: Are there other situations where I might be eligible for a free report?

4: What is a credit score, and how does it affect my ability to get credit?

For the answers to these and many more questions visit

Cornelius P Crumpacker