Many people have heard that their credit score could have a major impact on the decision of a lender to give them certain kind of loans, but they don’t know exactly how that could occur.
Basically, your credit score is an important piece of information that your scoring system lenders will provide you with; the credit score determines a lender’s financial risk in granting you certain kinds of loans or a credit card.
There are several credit bureaus of consumer reporting agencies (CRA) which handle collecting all the information, summarizing it and selling what they call you credit report or your credit profile to any company that searches for information about your financial status. Basically, this information helps them make out your financial profile and decide how safe it would be to approve a loan for you.
However, many times this information can be inaccurate, incomplete or out of date and sometimes it is even misleading, giving a picture of your economical situation that is not at all true or correct.
This kind of information can affect you greatly, as it could lead to a reduction in your credit score (or your FICO score, as it is commonly known from a professional point of view), and it could cause you to be denied a credit line or a certain loan you are applying for, or even a debt consolidation loan, so you might end up having to settle for a bad loan, with no benefits and considerably high interest rates.
There are hundreds of credit bureaus all over the United States, but most of them are affiliates of three major credit bureaus: Trans Union, Experian, and Equifax. They calculate your credit score or FICO score, which is a system that has been developed by a company named Fair Isaac & Co.
If you want to get more information about this subject, a very good place to start your research would be to go to the official site of this company, myFICO.com; they explain the scoring system and its importance. Generally, there are three credit scores that range from 300 to 850, one for each of the three major credit bureaus we have named above.
Each credit score is calculated on the basis of the information the respective credit bureau has on you. this information is kept on a specific file, and it makes up your credit profile; whenever the information about you changes or a new piece of information is added with concerns to your financial situation, your FICO score modifies accordingly, so it is a matter of constant updating.
It is important to verify this information yourself, so that you can make sure you have a correct credit score rating and do not risk being denied a loan because your credit score is inaccurate.