Questions Regarding Your Credit Score That You Never Thought You’ll Ask

The US lending industry is definitely based on credit and getting acquainted with the current credit scoring system in America is indeed a daunting task. It is rather easy to wrap up your credit report and lose sight of it, thereby ignoring the big-picture questions that could have had a major impact on understanding the entire topic of credit scores. Credit scores are the most important 3-digit numbers that are required by a lender and a borrower while going to take out a loan. But is your credit score only needed to get a loan? Is there no other use of these numbers? Well, have a look at some of the most common questions on your credit score that you would have never asked yourself.

  • What is the exact meaning of my 3 credit scores?

There is a lot of chatter about credit score that we hear from our friends and family members. All the talk is about a monolithic number. For example, “my credit score is 630”, “it’s important to have a good credit score”. In total you have 3 credit scores. Why is this so? This is because there are 3 credit reporting agencies, Experian, Equifax and TransUnion and all 3 of them offers credit scores. When banks are to decide whether or not they should lend you money, it is a pretty common practice for them to make an average of the 3 scores in order to come up with the right estimate. This is what is meant by your three credit scores and if you still have doubt, you should ensure reading the websites on credit score.

  • What is the relation between your credit score and credit report?

Both the terms credit report and credit score can be used interchangeably and this is what causes people to lose track of what each word means. Although it’s true that there’s a relation between your credit score and credit report, they’re definitely not the same thing. Your credit report is nothing but a detailed record of your history of how you handle credit and debt. It has information of both closed and open accounts, including the different types of loans all your payment history. On the other hand, your credit score is the numeric representation of what is there on your credit report. Your history of payments and present credit utilization are the 2 most important factors in assessing your score.

  • Apart from getting a loan, what else is influenced by your score?

You might have the wrong notion that your credit is important only when you need a loan. Apart from a bank, who else would bother to look at your credit scores? But the fact is that nowadays, the landlord before renting you an apartment will check your credit score, the insurance agent before finalizing your insurance policy will check your credit score, your mortgage lender will check your score and your employer too will check your score before extending a job to you.

Hence, when you’re in the market to take out a loan or rent an apartment, ensure that you have a stellar credit score so that you may be offered favourable rates at the best competitive price.

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