More and more creditors are moving away from evaluating a credit history and towards a credit score to determine whether or not an applicant gets a loan.
These aren't just banks; they're insurance companies, mortgage lenders, landlords, even employers.
Your credit score tells them a lot about who you are when it comes to paying debts: are you trustworthy? Reliable? Responsible? A credit score is a glimpse into your financial past, and many creditors use that as an indicator -fair, or not- of your future ability to repay loans.
There are several different credit scores, though the main three are those provided by Equifax, Experian and TransUnion.
These scores are often called up when you apply for a loan, so you should check them all for disparities before applying.
The most popular number now is the FICO Score, which you can find at myfico.
com.
A FICO score ranges between 300 and 850, with anything over 720 considered to be excellent.
If you find yourself under 720, don't fret.
You'll still qualify for loans, though you will face a higher interest rate (because the company sees you as a greater risk than someone with a higher FICO score).
If you have a lower FICO score, you might not be able to purchase life insurance, rent a place or take certain jobs that require money management.
So how do you improve your FICO score? Generally, any sound money management will help you out such as paying your bills on time, paying down exiting debts, applying for less credit and building up your savings.
In addition, you should look closely at your credit history and dispute any discrepancies you may find: many times, people find one or two serious items on their history that they can easily have removed.
This can make the difference between a new home and an apartment on the wrong side of the tracks.