A credit score is a three digit number that can be rated from prime to very bad. Your credit score is computed using the information on your credit report so by looking at your credit report you should get an idea on what your score will be.
So how does credit score work?
Your credit score is computed using the information found on your credit report that is why it is important to check it to make sure that all information is true and correct. A percentage is taken from your payment history, length of credit and existing debt to come up with a credit score. Just what percentage is used to compute your credit score depends on which credit reporting agency is being used. They also take into account your credit information differently although there are similar factors. Don’t be surprised if you get your credit score from each of the bureaus and they are not exactly the same because the three different credit reporting bureaus use different methods.
What we can say for certain is that a good credit history means a good credit score. One late payment can ding your credit score. How late it is can even be a factor. For as long as you have a good payment history, have a long credit record and have not filed for bankruptcy in the past seven years then you can expect to have a good credit score.
How useful is it?
Your credit score may be more important than you think. In fact in can be as important as determining a big step of your life from being able to get a good loan, and thus saving you a lump sum of money in the long run to getting that dream job. We have established by now that when applying for a loan, your credit score and report are the deciding factors on whether you will be denied that loan or granted it and how good of a deal the lender will give you. You see, based on your credit report and score, the lender will determine the likelihood of you repaying the debt. A bad credit score will lead them to believe that there’s a good chance you will be missing payments.
Employers check your credit score to see how responsible you are with your finances too and you may be turned down for a job all because you seem irresponsible by having overdue bills. While some may argue that it is illegal for employers to base their decisions on hiring people based on their credit score, only ten states have outlawed this practice.