HOW DOES THIS ONE NUMBER EFFECT YOUR LIFE? Your credit score is a number. A number that may effect your life in a good or bad way. It determines whether you can get that loan to buy a car or a home, and it determines how much interest you’ll pay. And a little higher interest payment can mean a much higher cost, over the term it takes to repay the loan.
Your credit score is calculated from factors such as the amount of your current debts as compared to your overall credit. It also takes into account your past history of bill paying, how long you’ve been using credit, the types of credit you have used, and even the number of inquiries about your credit.
In essence, credit scoring is a bunch of math, since the process of calculating your credit score is done automatically.
Credit scores typically range from 300-850 for consumers in the United States.
Credit scoring systems are integrated into the lending process to standardize the way lenders determine how likely a debtor will be in terms of repaying a loan.
In the world of credit scores, bigger numbers are better and reflect a higher probability that you loan will be repaid on time.
When creditors file late payment reports about you, or difficulties collecting payments from you, your credit score goes down. Furthermore, when judgments and collection agency activity is reported, your score decreases even more.
Ultimately, continued delinquencies and negative filings about your record history can result in a negative credit rating or adverse credit history, which will mean you may not be granted a loan at all, or, you may have to pay high interest rates to obtain a loan.