Insight Into Credit: What You May Not Know About Credit Scores

Everyone has heard the phrase “credit standing.” It’s the three-digit number based on your credit history. It tells a lender how well you’ve managed past credit and predicts your future creditworthiness. Your credit score may affect your ability to buy a home, customize the car, or even in some cases, secure a career. But you may not understand how credit works or even the different factors that affect your score?



That “FREE” credit worthiness may not be your FICO score. There are several free tools that will give you some idea with the items your credit worthiness may be. Companies like Credit Karma present an alternative score referred to as a VantageScore, that is usually free having a subscription on their finance services.



But good Consumer Financial Protection Bureau, this alternative or “educational” score isn't the same as a FICO score. In fact, it's not at all typically utilized by lenders to generate credit decisions. There are actually 65 designs of credit scoring that banking companies can choose from with regards to lending.



So after you request your score from the free service, do not forget that it is usually several points higher or less than the FICO credit history pulled with a lender. You need to understand credit utilization. Credit utilization would be the ratio of the credit card balances to credit limits. 1,000, the employment on that card is four percent.







The lower the use, the higher quality; this implies you’re only employing a small amount of the financing that has been loaned to your account. High credit utilization is usually damaging in your score given it indicates that you can be overextended or prone to falling behind on payments. A good general guideline is to keep credit utilization at thirty percent or lower to keep up a healthy score.