Aiming High Within the Credit Score Range

In order to assess a person’s financial reliability, it’s useful to have a clear means of reference that reveals important information about their credit status. FICO’s credit score range serves this purpose for potential creditors and an understanding of how they are used will provide an incentive to avoid further bad debt.

A credit score is a numerical indicator of your reliability in your dealings with creditors. It provides testimony to your consistency in paying your debts which is used by lenders to determine whether or not you would be a dependable client. Naturally, the greater the perceived risk that you won’t be able to pay them back, the less likely they will be willing to grant you credit on agreeable terms (if at all). Since your credit status is taken into consideration by all parties that would grant you loans (car companies, banks, etc.) it is crucial to monitor and maintain a high credit score.

Credit scores are calculated by consumer reporting agencies and are included within credit reports (also known as credit file disclosures). These provide detailed records of your credit history while are compiled through access to account information, public records, and inquiries. Your credit report must contain an account which has been updated in the last six months so there is sufficient information to calculate your credit score. Scores are often referred to as “FICO” scores (a reference to the Fair Isaac Corporation, which designs software used in calculations). Scores fall on a scale from 300 to 850, with higher scores indicating a better credit history and less risk to future lenders.

There are three main agencies which produce credit reports that include FICO scores: Equifax, Experian, and TransUnion. Each has a specific name used in reference to FICO scores (BEACON, Experian/FICO Risk Model, and EMPIRICA respectively). You are entitled by the Fair Credit Reporting Act to receive a free credit report from each of these agencies every twelve months.

Since most lenders will overview credit reports from all three bureaus, it is advisable to get a free credit report from each agency to make sure there is no erroneous information included. When you ask for credit reports from multiple bureaus, ascertain that they all have the same data about your finances, since each agency determines your credit report according to information that they have received from lenders and public records. If there are any inconsistencies, different agencies may give you different credit scores. Equifax, Experian, and TransUnion have developed VantageScore®, which uses the same formula to avoid discrepancies between credit reports produced at the same time.

Although some credit bureaus produce scores that are determined by their own models, FICO scores are by far the best known and are commonly used by creditors. However, lenders may also take scores generated by different models into consideration when determining your credit status. These include Application Risk scores and Customer Risk scores (also known as “behavior scores”). Nevertheless, your FICO score is what will be most influential in determining your future access to credit. That said, in the struggle to retain strong financial mobility, maintaining a high credit score is a winning strategy.

Siddarth Nagaraj

Siddarth Nagaraj is a junior at the University of North Carolina-Chapel Hill. He is currently pursuing a double major in Global Studies and Political Science with a minor in Geography. Originally from Winston-Salem, North Carolina, he is interested in socioeconomic inequity and cultural diversity in developing nations. He is also a Section Editor for The Hill, UNC’s only nonpartisan political review, and has written multiple articles on international affairs for the quarterly publication.

Since the summer of 2010, he has volunteered as a Savings Officer for the Community Empowerment Fund (CEF) in Chapel Hill, which seeks to promote financial literacy and help fiscally strained individuals achieve self-sufficiency. Apart from writing, Siddarth enjoys reading, travel, and watching British television programs. Upon graduation, he plans to earn a graduate degree and seek employment in the field of international development.

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