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Getting Your Credit Report and Understanding Whats On It
If you intend to apply for a loan, you need to obtain your
credit score. Understanding what this score means will allow you
to make the loan process easier and quicker. Let's face it; most
people want the loan process to be as painless as possible.
Obtaining and understanding your credit score will help you see
potential problems and perhaps eliminate them before you begin
the loan process.
There are three different Credit Bureaus from which you can
obtain your credit score. These are Experian, Equifax and Trans
Union. Each of these companies applies a different formula in
figuring your credit rating, though these formulas are weighted
so a score from one company is equivalent to the same number
score from the others. Because these three firms coordinate their
credit rating system through the Fair Isaac Company, the credit
score is known as a FICO score. Particular loan companies might
look at your salary or the stability of your current employment,
but the FICO score usually provides a good understanding of a
person's credit standing.
Your FICO score is based on your credit report, which is a
combination of your current credit accounts and your long term
credit history. The past two years is by far the most important
part of your credit history. Usually, a bad spot on your credit
record will disappear once the twenty-four month window has
closes on it. Your credit rating can range anywhere from 375 to
900, but most scores are in the 600-700 range.
650 or more. This is considered the magic number, and if you
score 650 or higher, then you have excellent credit. If your
credit rating is 650 or above, acquiring loans should be
relatively easy and your interest rates should be to your
liking.
Between 620 and 650. This is where most people stand and means
you will be able to obtain reasonable loans and rates of
interest, though the process might be a little slower and you
might have to answer a few more questions.
Below 620. This doesn't mean you cannot get a loan. But it
does mean the loan process will be longer, less pleasant and with
more strings attached. Understanding this fact about your credit
score will help prepare you when obtaining a loan.
If you find a discrepancy in a credit report, you need to
address your concern to the appropriate credit bureau. If you can
give a reasonable explanation for the mistake or, better yet, if
you can provide documentation to contradict the discrepancy, you
can have your credit report changed. Usually, all three credit
bureaus will not make the same mistake and your FICO score will
be correct. I would suggest not inquiring about your credit score
too often, because each inquiry goes on your credit record and
the appearance of concern can affect your credit score.
Finally, remember that the number of the FICO score is not
important in itself. Each creditor will have different credit
rating cutoffs, so a firm understanding of your potential
creditor's credit score guidelines will help you understand the
real implications of your credit score.
You can read more about credit and debt issues at the
Debt
Consolidation Blog.
MORE RESOURCES:
Credit - Google News
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