Credit scores and reports aren't just used to determine if consumers qualify for loans and credit cards. They also help determine what interest rate and terms borrowers receive and are increasingly used in decisions by landlords, cell phone companies, utility companies, insurance companies, and employers. Most Americans know that it's important to have a good credit score, but fewer are fully aware of the factors that affect the score they receive. To help remedy this situation, nonprofit Guidewell Financial Solutions has created the "Incredible Edible Credit Score," a one-minute video that's informative, tasty and FUN. It shows how your FICO score is calculated. This is the credit score most lenders will use to evaluate your financial standing.
Why not join their virtual pizza party and share the video with your co-workers, family, and friends? In return here are three credit score facts everyone needs to know:
- Credit reports and credit scores are not the same.
Studies show that many of us don't know the difference between credit reports and credits scores. To keep them straight, just remember when you were in school: Your credit report and credit score are a lot like the school report card and grades you used to receive.
Like report cards, credit reports provide an overview of your performance, showing how well you manage your finances and credit. Compiled by the three major credit reporting companies -- Experian, Equifax, and TransUnion, they each contain a detailed history of your current and past credit accounts and debt, third-party collections, certain public records and requests by lenders for the credit reports. They also list the dates accounts were opened, loan amounts, current balances and payment history, including late payments or defaults.
Consumers are legally entitled to request and receive a free credit report copy from each of the major credit reporting companies every 12 months. To access yours, visit
annualcreditreport.com or call 1-877-322-8228.
Credits scores are like the individual grades you received in school. Each one offers a numerical snapshot measuring how much of a credit risk you are. There are many types of credit scores, each with its own scoring model. FICO scores are the most common, but even these focus on slightly different information relevant to the industry for which they're geared. Scores are generally based on information from your credit report. There's also a rising movement to help consumers who don't have credit scores build and qualify for credit using other means.
- Your credit score regularly changes.
It's true. Your credit score may change any time new information is added to any of your credit reports. For example, if you miss a payment, close an account, or apply for a new loan, this may change your score. One thing that doesn't change your credit score: How often you check it. That's right, you can do so at any time and it doesn't affect your credit rating in any way.
If you want to check out your current credit score, MyFico.com charges a small fee. Sites like CreditKarma.com and CreditSesame.com also provide consumer versions of a person's score. If you choose to go this route, make sure the site you use is reputable and be aware that the score it shows may not be the same as the one FICO provides.
- Building a good credit score is more important than ever.
Why? Because credit scores are used in more ways than ever. They may help determine the rate you pay for insurance or what terms you receive on your next mobile phone plan. In the coming months, if interest rates go up and you have a low credit score, you'll pay even more for interest when you apply for credit cards, mortgages, and other loans than you did before. Understanding how your credit score is calculated provides you with an important key to building better credit.
That brings us back to the "Incredible Edible Credit Score." Check out the video to see the factors that affect your FICO score and receive tips on how to improve your credit. You may go away hungry but also better informed!
About Guidewell Financial Solutions
Guidewell Financial Solutions (also known as Consumer Credit Counseling Service of Maryland and Delaware, Inc.) is an accredited 501(c)(3) nonprofit agency that helps stabilize communities by creating hope and promoting economic self-sufficiency to individuals and families through financial education and counseling. Maryland License #14-01 / Delaware License #07-01
Copyright © 2017 by Guidewell Financial Solutions.