Make no mistake about it. The evolution of credit scoring has helped consumers. The system was designed to give lenders a faster, unbiased idea about the risk associated with making a loan to someone. Think of it as a measure of a person’s credit worthiness. How exactly is the score calculated? There are five major categories of information used and no one piece of information will determine your score. Credit scoring has allowed lenders to make more credit available, which in turn, brings down the costs of that credit in the form of lower rates.
The higher your credit score, the lower the risk to making a loan and thus the lower your expected interest rate will be. This concept of risk-based pricing has made it even more important for you to do everything you can to make sure your score is as high as possible.
Improving your credit score is a process. They did not build Rome in a day and you will not go from 550 to 800 in a day either. Think of a good credit score as a journey and not a destination. The way you live your life and manage your personal finances will show itself in the form of your credit score. Here are a few of the myths about credit reports and what does/does not impact your score.
Tags: credit, Homeownership 101, How To Get Home
