A credit score is the amount of risk that a person will fulfil his or her obligations on a loan, mortgage, or credit card payment that they take from a lender. The credit score is important in determining the risk that the person poses for the lender’s money, which allows the lender to identify a rate at which they can offer the loan without incurring undue risk.
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The key factor in a person’s FICO score is the person’s payment history, with the utilization rate of lending services featuring as the second most important factor in determining FICO scores. One way to earn points on these two factors is to pay all bills within the set deadlines and ensuring that the loans themselves do not amount to huge balances.
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Current Estimated Score Range
Higher Score Range
Lower Score Range
685-735
725-775
475-525
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The results of the Credit.com calculator indicate that individuals with more debt and a history of defaulting on loans also have lower credit scores while those with balances on their loans and a history of payment have higher scores than people who have never had a taken a loan or registered for a credit card.
Credit Reports
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A credit report contains a person’s borrowing history and comprises a statement of the person’s credit activity as well as credit situation at the time of the report’s preparation. This allows lenders to determine whether a person can conform to the terms of any extant credit accounts to ensure that they qualify as credit worthy.
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Any negative history in a person’s credit report can adversely affect his or her credit scores for up to 7 years, with bankruptcy history remaining on the report for up to 10 years. For incorrect history, a person can make a request to the credit bureau using a goodwill or pay-for-delete letter with similar effects.
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I found it surprising that people sometimes have to pay to get inaccurate information off their credit reports. I also marveled at the fact that a negative credit history can remain on a person’s record for 7 years even after the person fulfils his or her obligations after defaulting, given the fact that defaulters still have to pay premiums when they resume their payments.
References
Credit.com. (2018, March 9). Better Credit for All – Get Started for Free at Credit.com. Retrieved from Credit.com: https://www.credit.com/
myFICO. (2018, March 9). myFICO | The source for FICO Scores, credit reports and credit monitoring. Retrieved from myFICO: https://www.myfico.com/
