Understanding Your Credit Score
Your credit score defines your ability to obtain loans and repay your debts. To lending institutions, you are your credit score. Credit score affects nearly every aspect of your life in a very real way. For these reasons, it is necessary that you understand what your credit score is, what it says, and how you can build it up to put your best foot forward when applying for a loan.
Determining Your Credit Score
Your credit score is determined by your credit history; that is, how quickly and responsibly you pay back your debts, ranging from credit card payments to mortgage and loan payments. These reports usually come from one of three major credit bureaus: Equifax, Experian, and TransUnion. The credit score reflects only your ability to pay back loans, not your income level. Each bureau has a different system for evaluating credit score, which are often combined by lending institutions to gauge your overall credit rating.
The most common form of credit score is called FICO, the name of which derives from the company that created it, Fair Isaac Corporation. FICO scores range between 300 and 900; the higher the score, the better your credit rating.
Building a Good Credit Score
Now that you know that your credit score will directly affect your ability to make the large purchases in your life, you'll want to know what you can do to build and maintain a good credit score. Here are some tips:
- Apply for a credit card. Regular payment of credit card debt will provide you with a strong credit score.
- Don't have too many credit cards. The more cards you have, the more likely you may be to skip a payment, which will have a negative effect on your credit report.
- The credit bureaus provide one free credit report per year. Take advantage of this so that you can stay on top of your credit score.
Contact Us
If you have questions about how your credit score can affect your ability to obtain a mortgage loan, contact the Maryland mortgage modification lawyers of Chaifetz & Coyle, P.C., by calling 443-546-4608.