Your Credit Score
Your CREDIT Your MONEY|January-March 2017

Your credit score can mean the difference between being denied or approved for credit, and a low or high interest rate. A good score can help you qualify for an apartment rental or a job and even get your utilities connected without putting up a deposit.

But, most Americans do not understand what goes into computing their credit score or how their score will affect their ability to get a mortgage, car loan, or a credit card. This comes from a survey of 1,000 adult Americans commissioned by the non-profit Consumer Federation of America. Also revealed was that even those who have obtained their scores have serious knowledge deficiencies about what is all means.

What is a Credit Score?

A credit score is a three-digit number generated by a mathematical algorithm using information found on your credit report. This number is designed to predict risk, specifically, the likelihood that you will become seriously delinquent on your credit obligations in the 24 months after scoring.

What Types of Scoring Models Are There?

There are a multitude of credit-scoring models in existence, but one dominates the market: the FICO (Fair Isaac Corporation) credit score. FICO has been in business since the 1950's but began the famous FICO score in the mid-1980's. The highest FICO score is 850 and the lowest is 300. According to myFICO.com, 90 percent of all financial institutions in the U.S. use FICO scores in their decision-making process.

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