How Your Free Credit Score Affects You
Your free credit score is a 3-digit rating number that helps lenders predict what kind of credit risk you will be. Your score is computed from information contained in your credit reports, which are created by the 3 big credit bureaus. Scores range from 300 – 850, with the average being 700. You have the legal right to see your credit report annually (from all 3 bureaus) at no cost. However, you will typically have to pay to see your credit score, which is considered proprietary information.
Financial lenders believe there is a direct correlation between your score and your chance of defaulting on your credit responsibilities. So the higher your free credit score, the lower the risk of defaulting. High scores get the best loan terms; low scores the worst.
Your free credit score is based on over 80 factors and is computed based on the contents of your credit report at a given point in time. Credit scores are not fixed, but change with new information.
Factors Used to Determine Free Credit Scores:
* Your payment history
* Number of credit accounts you have
* Amount of credit used in comparison to your total credit limits
* Length of credit history
* Number of credit inquiries
* Bills sent to collections agencies
* Any legal judgments against you or bankruptcies
Knowing the reasons behind your particular score is as important as knowing the score. This knowledge lets you proactively manage your credit so you can get better loans at lower interest rates. If you want to get an idea of your total credit picture, request your free credit score at the same time you request your free credit report.
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