Your free credit score
is a number that sums up your current credit rating and announces to lenders how
credit-worthy you are. Your credit score is used by everyone from banks to auto
dealers to landlords as a way to quickly assess their risk in lending. The
credit score scale runs from 349-849 with 723 being the national average. If
your score is below 640, you will probably have difficulty finding a good loan.
A recent study found most Americans have no idea what their credit score
is.
How is a Free Credit Score Created?
Your credit score is
created from information in your credit report, including how much debt you
have, your debt-to-income ratio, your current balances, past payment history and
many other variables. Each credit bureau uses its own mathematic formula to
crunch all this data and arrive at your credit score. Your scores at all 3
bureaus will probably differ slightly because not all creditors report to all
bureaus. Most lenders pay to see all your scores so that they have a complete
picture of your history.
Why is the Credit Score Free?
Actually your credit
score is never free. TransUnion, Experian and Equifax credit bureaus all charge
you to see your scores, even when your credit report is free. That's why the
3-in-1 free credit report is so valuable. You receive all your scores and all
your credit reports for free. All you do is sign up for a free trial of credit
monitoring for 7 days. You may cancel at any time, but you'll always keep your
reports and scores.
How is a Free Credit Score Used?
Your free credit score
determines much of your financial life, whether you realize it or not. The
scores are not only used to determine whether you receive credit, but sometimes
as a personal assessment of your character. Credit scores and reports are often
pulled when you are being evaluated for a job or an apartment lease. It may not
be fair, but it's reality.
Your credit score is
used for many things including mortgages, home equity loans, auto loans, store
charge cards, major credit cards and insurance quotes. If you have a good score,
you can negotiate with lenders for better terms and interest rates.
Are Free Credit Scores Ever Wrong?
Because your free
credit score is a mathematical evaluation, it's only a reflection of your credit
report. Credit reports often contain multiple errors, so in that sense, your
credit score may not be a true representation of your credit. The best defense
is to check your credit reports regularly for errors.
