Credit Repair - Your Score
Did you know that if you are a consumer, you have a credit rating? Tracking your spending and debt behavior begins at an early age.
Many people have heard of a TRW. Most people have heard that if you do not pay a bill, it is reported on your TRW. People or entities who were considering loaning you money would look at your TRW to determine if you were "worthy" of them lending you money. People who lent you this credit could buy the information from a credit reporting agency. Back around 1996, TRW was bought out and was renamed Experian.
There have traditionally been three credit reporting agencies that provide credit information to creditors: Experian, Equifax and Tran Union. Recently, a fourth one has appeared: Innovis. Some creditors use one, some or all of these services to check your credit. Some intermediary reporting companies issue "tri-merge reports that attempt to harmonize all three into one report.
In 2003, Fair Isaac Corporation (FICO) became the name of a company that started offering a way to analyze credit risk back in 1956. Using a proprietary formula (approx. 35 percent payment history, 30 percent amount currently owed to lenders, 15 percent length of credit history, 10 percent number of new accounts opened or applied for, and 10 percent mix of credit account types) they created a "score." Typically, creditors want a credit score that is the average of the three scores of the three credit reporting agencies, but a fourth (Innovis) has appeared.
The purpose of a credit score is to determine the likelihood that you can fulfill your promise to pay back the credit they may offer you. In theory, the higher the score, greater reliability is placed in this ability.
You can obtain a lower interest rate the higher your credit score is. The lower the risk, the lower your interest rate will be.
Credit scores range from a low of 300 to a high of 850. To see an example of how your score can affect the interest rate on a $350,000 home loan, 30 year fixed mortgage, goto www.myfico.com
In their example, the difference in interest can cost you tens, even hundreds of thousands of dollars more in interest charges over the life of the loan if you have a low credit score.
