What Is A Credit Score?
A Credit Score and FICO score (Fair, Isaac and Company) mean the same thing. This score is 100% specific to you. A bank uses this score to evaluate the risk to lend you money.
Every time you pay your bills, you build this credit score. So if bills are paid on time, you get a higher score than if the bills are paid late. Your credit history is also scored if you allow a bill to go to collections.
Essentially a Credit Score is a score or grade. It shows lenders how you have made payments to other creditors in the past. It illustrates what your credit risk may be for a new loan.
The 3 Bureaus
There are three bureaus that collect your credit history. A Credit Score is generated from this history, using an algorithm. They bureaus are Experion, Trans Union, and Equifax.
All three bureaus get information from creditors. They put that information together using a set of rules to create your score.
When you are getting qualified for a home loan, the mortgage company uses the middle of the three scores.
Interestingly, if there is more than one borrower on the mortgage, for example, a husband and wife are borrowing for the mortgage, the lower of the two middle scores will be used to qualify them.
What Does It Affect?
Your Credit Score can affect the loan options available to you. For example, interest rate options will go up or down depending on your score.
Having a good credit score will also make more loan programs available to you.