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Credit Score Basics
In the past, financial lenders did not have a
significant system in place to establish risk for borrowers.
Lenders used a mixture of intuition, past experience, and a
biased review of past consumer behaviors in order to
minimize the risks inherent to credit lending. Today,
basic
information taken from a credit report can be used to
calculate a fair, accurate credit score.
A credit score allows lenders to mark how a consumer
compares to other like candidates in terms of credit. The
well-known FICO credit score system utilizes a range of
numbers from 300 to 850. Using a checklist of predetermined
variables, a consumer's credit score is used to calculate
into which category of risk they fall. Normally a score
above 720 is considered a good risk, while scores falling
below 600 are considered a poor one.
If you have experienced financial hardships in the past, you
should look into improving your credit score. A higher score
may lead to greater credit limits backed by lower interest
rates, competitive Annual Percentage Rates or more lenient
minimums on your payment schedule. To improve your credit
score, be sure to maintain a clean, accurate credit report.
Make on-time payments, or remove any record of late payments
from your credit report by negotiating with the lender.
Mistakes also appear from time to time on credit reports,
which can be easily disputed if you stay vigilant.
Basic information found on a person's credit report is used
to determine the credit score.
Whenever you apply for
credit, an inquiry can be made into your credit history.
Certain types of inquiries may directly impact your credit
score, and therefore it is critical that your credit report
is checked only when necessary. Consumer disclosure
inquiries, as well as promotional and account review
inquiries, will not adversely affect your credit score.
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