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Credit Rating
and Credit Score
If you are interested in
buying a home or a car -- or if you are just interested in
bringing a better sense of order to your financial house --
it is important for you to understand your credit rating and
your credit score. This article provides you with a much needed
overview of your credit rating or your credit score.
The Definition of Credit Rating and Credit
Score
As far as most people are
concerned, credit rating and credit score are interchangeable.
They are both considered in determining how much credit a
borrower deserves. However, you could say there is a shade
of difference—a credit rating is the amount of credit
(and sometimes tells how high of an interest rate) a person
should have based on her score. Your credit rating changes
as your score changes because you become either more or less
creditworthy.
How the Credit Rating or Credit Score Really
Works
Whether you are looking
at buying a new house, a car, or would like a credit card
for various reasons, the one factor that will determine whether
you get what you think you need is the credit score. This
three-digit number between 300 and 850 will tell a lender
or creditor how much of a risk you are. The higher your number
the less risk.
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Understanding
Your Credit History
This number is based on
your past. Your credit history is first accessed and reviewed,
then assigned that all-important number. This scoring system
was invented by Fair Issac and Company at the behest of the
three major credit bureaus; Equifax, TransUnion, and Experian.
The final score is based on how long you have had credit as
well as what types of credit, your payment history and if
you have had any late payments, and existing loans or credit
and the status of those accounts. Although employment and
wages play a big role in extending credit, these items—plus
a few others—determine your credit score.
From your history, your credit score will be assigned. Potential
creditors will use the report and score, wages, job history,
and other financial issues to determine your credit rating
and whether you can handle more credit or loans. If they determine
that you can, your credit score is often used to determine
your interest rate and type of credit you will get.
Interest Rates and Your Credit Rating of
Credit Score
For instance, you may be
able to get a loan with less-than-stellar credit, but your
interest rate will be higher. This means that over the life
of the loan, you could pay thousands and thousands of dollars
that you wouldn’t have if you’d had better credit.
It also means that you may be subjected to more predatory
lenders who look for people with bad credit (or low incomes)
to charge them huge amounts on loans.
Keep Your Credit Rating or Credit Score
in Good Shape
It’s important that
you keep your credit score and rating in good condition. But
be careful of the scams that promise you a fast cleanup on
your credit—cleaning up your credit rating and credit
score takes time and effort. |
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| Home |
| Credit Score Basics |
| FICO Scores |
| Key Factors |
| Improving Credit Score |
| Checking Credit Score |
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Latest
News
4/23/08

A credit inquiry typically lowers your score by five points or less. Credit inquiries reduce credit scores because lenders believe that multiple inquiries are associated with high risk of default.



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1/20/08

With the introduction of the VantageScore in addition to the FICO score, consumers are confused about the credit score range and about the credit scoring in general. Here are the main differences between the two credit scoring systems.



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11/28/07

Zopa Ltd., a United Kingdom player in the person-to-person online lending market, is starting operations in the U.S. where it will join a handful of other companies, including Prosper Marketplace Inc.'s Prosper.com, that have popularized the market in recent years.



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6/25/07

Equifax Inc. emphasized that VantageScore(sm) and the Equifax Risk Score 3.0 are not - and never have been - impacted by the authorized user manipulation. Authorized user information is excluded in calculating both VantageScore and the Equifax Risk Score 3.0.



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6/18/07

Although Fair Isaac Corp., the Minneapolis company that created the FICO score doesn't give out many details about the changes, the company spokesman said there will be more segments in their scoring model.


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6/11/07

As credit scores take more important role in many parts of our lives, more ideas are popping up everyday to boost our credit scores. Recently, some borrowers with low credit scores are turning to a fast-growing business on the Internet: “Credit Renting.”



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6/8/07

The Supreme Court ruled in favor of two large insurers, limiting the circumstances under which companies must tell customers their credit ratings are affecting the amount they pay.


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