Posted on 2014-08-27 09:00:38
Some consumers are obsessed with their credit score. That’s not all bad. After all, your credit score can have a big impact on your life and your wallet. Credit scores are used to make quick yes/no decisions on credit applications. They are used to determine the interest rate you will pay on a loan. They are used by employers to make hiring decisions. They are used by landlords to make rental decisions. The bottom line is: Credit scores do matter! The mistake many consumers make is to focus solely on the number. Many consumers don’t know there are hundreds of scoring models in use today. Even FICO has dozens of scoring models for different purposes. Different scoring models could score the same credit file differently. To add to the confusion, different score ranges are used. A credit score of 700 on a scale of 350 to 850 is better than a credit score of 700 on a scale of 400 to 930. See your credit score now! To add more confusion, consumers will rarely get a credit score that uses the same scoring model as a lender uses. Lenders often use industry-specific credit score models. An auto loan company, for example, maybe more interested in how you have handled past auto loans than in whether you have been late on a credit card payment. Consumers usually receive an “educational” credit score that might be broader in scope. The important thing is to look at what your credit score is telling you. When you receive a credit score, you will usually be showed how it ranks on the scale being used. You will likely also be given specific factors that are affecting your credit score for better or wore. Take note! That’s where you can make changes that can help your credit score go up instead of down. Accuracy Matters It’s important to understand is that credit scores are calculated based on the information in your credit report. As the saying goes, “Garbage in. Garbage out.” If your credit report has mistakes—and many do—your credit score may not be an accurate reflection of your credit history. It is important to maintain an accurate credit report, and that requires checking your credit report frequently or using a credit monitoring service such as MyFreeScoreNow to alert you when there are significant changes in your credit report. You are the only one who can recognize mistakes or fraud.