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The FICO Score Misconceptions
There are many misconceptions about credit scores out there.
There are borrowers who believe that they don't have a credit
score. There are others who think that their credit scores don't
really matter. These sorts of misconceptions can hurt your
chances of gaining employment, obtaining preferred interest
rates, and even your chances of qualifying for renting an
apartment.
The truth is, of you have a bank account and you pay utility
bills, then you have a credit score, and it matters more than you
might think. Your credit score can be called many things such as
a credit risk rating, a FICO score, a credit rating, a FICO
rating, or a credit risk score. All these terms refer to the same
thing: the three-digit number that lets lenders get an idea of
how likely you are to repay your bills.
Every time you apply for credit, apply for a job, or even
apply to some apartment complexes, your credit score is checked.
Another misconception is that employers check your credit only if
you apply for a job that involves handling money. The fact is
that many companies use credit checking as part of their standard
background checks.
Make no mistake, your credit report can be checked by anyone
with a legitimate business need to do so. Your credit score is
calculated based on complex formulas. Things such as your past
financial responsibilities, past payment records, credit limits,
credit line utilization, open and closed accounts, and public
records are all considered. It provides potential lenders with a
quick snapshot of your current financial state and past repayment
habits.
In other words, your credit score lets lenders know quickly
how much of a credit risk you are. Based on this credit score,
lenders decide whether to trust you financially. They use this
information to approve or decline a loan. Even if approved, your
credit score can have a direct effect on the interest rates you
pay. Apartment managers can use your credit score to decide
whether you can be trusted to pay your rent on time. Employers
can use your credit score to decide, perhaps unfairly, how you
manage your life. Some employers find that if you're poor with
money, you have poor organization skills and no attention to
detail -- things that are a must in a corporate environment.
The problem with credit scores is that there is quite a bit of
misinformation circulated about, especially through some less
than scrupulous companies who claim they can help you with your
credit report and credit score -- for a fee, of course.
From advertisements and suspect claims, customers sometimes
come away with the idea that in order to boost their credit
score, they have to pay money to a company or leave credit repair
in the hands of so-called "experts." Nothing could be further
from the truth. It is perfectly possible to pay down debts and
boost your credit on your own, with no expensive help whatsoever.
There are many free resources on the web that will enable you to
do just that.
Lee has done it all in the lending business. From loan
origination to processing to underwriting, even owning a mortgage
company. In http://www.credit-restoration-kit.com,
he exploits the secrets of the industry to help fix credit, obtain
mortgages, and improve financial standing. Free articles,
resources, and a blog.
MORE RESOURCES:
Credit - Google News
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