7 things to know about credit score aka FICO

According to Wikipedia a credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of the person. Well one can read this and say: "What the heck does this mean?". Allow me to explain how personal credit score works and why it's important. <p>&#9632 Credit score can range from 300 to 850. Ideally you want to have your score at least above 700. Over 800 is excellent and below 650 pretty much means you will get 23% interest rate car loan. On $15K five year car loan you will pay $10,371.42 in interest alone vs $1,574.87 if you had let's say 750 score and received 4% rate.</p> <p>&#9632 There are three main credit bureaus in U.S. that can provide your score - Expedia, Experian and TransUnion. Each bureau can have slightly different score. Banks, landlords, insurance providers and employers usually get another different version of your credit score from one of those three credit bureaus. Fore example you may see on your end Experian reporting 720 score and bank will tell you that same Experian is reporting to them 705 or 735 score. The reason for it is slightly different score calculation formula. Why they use different one I have no idea.</p> <p>&#9632 Paying your rent, utility or cell phone bill doesn't build your score. Of course if you miss to pay one of those then your utility or cell phone company will report it to credit bureau and it will have negative effect on your score. You score only gets built when you repay any debt - car loan, computer loan, personal loan or home mortgage.</p> <p>&#9632 How to get your credit report? You can visit Experian, TransUnion or Equifax directly but you have to pay them to get the report. Once per year you can request your free credit report from Annual Credit Report at www.annualcreditreport.com . Also if you were declined a loan lender will send you a letter explaining how to obtain free credit report. In addition most of bigger banks or credit card providers these days offer credit reports and scores for small fee.</p> <p>&#9632 Yes, your credit score will go down if you fill out multiple applications within few weeks. If you are shopping for a credit card, car loan or mortgage try to keep it to two to three applications. If you submit dozens of applications then your credit score can be dinged 20, 40 or even up to 100 points.</p> <p>&#9632 Even if you have great credit score you still need to have income to qualify for any loan or credit card. In other words you have to be able demonstrate to the bank ability to repay the debt. 800 credit score alone with no job and no income wouldn't cut it.</p> <p>&#9632 If you have bad credit score and want to fix it don't hire anybody or pay for it. There are plenty of shady credit repair businesses that promise to fix your credit in 90 days. You don't need them, trust me. All you need to do just pay any debts, judgement or bills that show up on your credit and then make sure you don't miss your monthly payments for any outstanding obligations. The best advise I could give never get too excited about credit and borrowing. Buying house or car you most likely need a loan but to buy a computer or this nice new iPhone 7 you don't need to borrow $800 to pay for it. Save it and then buy it.</p>