Why Is My Credit Score Important?
A credit report contains personal information such as name, social security number, date of birth, current and past address and current and previous employers. It includes matters of public record such as tax liens, bankruptcies, foreclosures and court judgments. Credit history spans the past ten years of credit activity including the amount borrowed and the timeliness of payments. The report also lists all parties that have requested a copy of the report in the past two years.
Lenders use credit history to determine the probability of repayment, which influences the terms and availability of credit received. The record of credit activity is compiled in a credit report and the information determines a credit score, known as a FICO score. The FICO score represents credit risk at a specific point in time and is one factor used to assess the repayment probability. The FICO score is inversely related to credit risk; the higher the FICO, the lower the credit risk. Each lender determines its own risk tolerance and strategy of lending. Other factors lenders use to determine credit worthiness is the amount of existing credit versus debt, total assets owned, employment history and income.
There are many ways to improve your credit score. It is important to pay bills on time, keep balances low on credit cards, to not open new cards or several cards in a short amount of time and make sure to audit the accuracy of all information on the report at least annually. It is possible to obtain a credit report from all three credit bureaus at www.annualcreditreport.com.