Maybe you need a new car, a computer, or maybe a house or student loan for you child, there are many reasons that we apply for credit.
There is a magical 3 digit number called a, "Credit Score" that can decide if you get these loans or at least what it will cost you.
You may ask yourself how can a number affect my life so much.
Basically the way it works is that credit reports keep track of your payment history, how much credit you have open, and your debt to credit ratio.
These factors are calculated into your credit score.
This score will affect how much you can pay for borrowing money, insurance and even in some cases whether you will get a certain job or not.
This score is used when you are applying for new credit.
The lender will look at your score and based on that number will decide what your percentage rate on the loan will be.
This number helps the lender determine the amount of risk they have with you, depending on this number.
They use this number because it is easier for them and less subjective for them to make their decision.
They take your score and compare it with other consumers with similar profiles.
They take this information and they can tell what the likelihood is they will get paid back, and if you will will pay on time.
The credit score allows you to get credit instantly at department and other types of stores.
The most common method of scoring used by lenders is a FICO score.
Its origins are associated with the Fair Isaac and Company, they are the company that created this method of scoring for lending institutions.
There are 3 major credit bureau agencies, TansUnion, Equifax, and Experian, they consulted with Fair Issac to create this system.
Sometimes a lender may use their own type of method for scoring your credit history.
They can use this to determine what your income is and how long you have been employed at your job.