Chances are pretty good you’ve seen, heard or read an advertisement recently telling you that you need to know your credit score. If you’ve applied for a mortgage, a car loan or a personal loan, you’ve probably been told that your credit score was within a certain range, which qualified you for a certain rate of interest. In some cases, you might have been denied a loan, and told that the reason you were denied the loan had to do with your credit score.
What is a Credit Score?
At the end of the day, a credit score is just an imaginary number. It is supposed to indicate to a lender how likely it is that you’ll default on your personal loan, mortgage or credit card. The credit score is a sort of shorthand that’s designed to make life easier for lenders. Rather than digging through your credit report and looking at everything there, they can look at that number.
Where does it come from?
A credit score is generated by a computer that looks at a bunch of data and packs it together to form a concise picture of your credit history. The algorithm used to generate your credit score is complex and a closely guarded intellectual secret. The most popular credit score comes from a company known as the Fair Isaac Corporation. This is known as your FICO credit score.
Improving your score
The most common question people have about their credit score is how to improve it. There are a number of things you can do to improve your credit score, including: