Your Credit Life, Your Credit Score
Have you ever been denied credit because of your credit score? Do you need to know how to improve your credit history? You’re not alone. Prosperity Now (formerly the Corporation for Enterprise Development) reports that 56 percent of consumers have subprime credit scores, translating to a higher credit risk for lenders.
What’s a Credit Score?
Your credit score is a number that is calculated using information in your credit report. Lenders use a credit score to assess how risky it would be to lend to you, and the interest rate they will offer you if they agree to lend you money. The best (or lowest) interest rates go to applicants with the highest scores.
Most lenders use credit scores rather than credit reports because the scores reduce extensive, detailed information about your financial history to a single number.
The tricky part is that not all lenders use the same credit score. A “good score” depends on the scoring model used to calculate it. Most consumers are familiar with the FICO score, which is the standard, but there is another competing credit scoring system, VantageScore, which was developed by the three major credit bureaus.
Both FICO and VantageScore emphasize paying your bills on time and maintaining a favorable credit capacity (the amount of credit you are using in relation to your credit limit), but the two systems give different weights to particular types of credit-related behavior.
Understand Your Numbers