Credit Score

Credit Score - A credit score tells perspective merchants, loaners, credit cards and the like how credit-worthy a person is. The credit score will often determine whether or not you qualify for a home loan or a home loan, so you should be aware of what the credit score is and particularly what your credit score is. Your credit score is determined by your past credit history, both good and bad. If you have taken out a loan, made payments on time and/or paid the loan back, your credit score will go up. On the other hand if you have had problems with credit in the past, for instance were unable to make your loan payments on time, or maxed out credit cards and were (or are presently) behind in payments, this will all cause your credit score to be subtracted from.

Banks and credit institutions obtain your credit score from one (or all) of the three main sources; namely, Equifax, Experian (formerly TRW) and Trans Union. Among these three the largest and most often used is the Equifax corporation. In order to determine your credit score a merchant, bank or creditor will use the information obtained from one of these three credit reporting agencies and will compare your credit history against others (usually a random selection of clients) in order to determine your creditworthiness. The actual method used for obtaining your credit score is often complex and changes from one creditor to the next, so that one bank or credit institution may come up with a completely different credit score then another.

The credit score obtained by the bank or credit institution is only as reliable as method used to obtain it. If you find yourself turned down for a loan or credit and you believe your credit score should be much higher, you should ask the bank or credit institution what method they used to determine your credit score. You may be able to get them to re-evaluate your credit score if you can show them that another bank or institution has given you a higher score. Often a lower credit score is due to the bank or credit institution using too small of a sampling to check your credit against.

While obtaining your credit score isn't an exact science, you will find that by going by some key guidelines, keeping your credit report straight and (when possible) having incorrect or bad reports removed, you can know what your approximate credit score will be and you can use this knowledge in order to help you in deciding whether or not to apply for a loan or a credit card.

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