Some Details About Credit Score in the USA
The modern American market and the entire modern American economy would not have developed if a way had not been invented to manage credit information about a borrower and, if necessary, provide it to a potential lander. Moreover, not only financial institutions or banks, but also homeowners, phone, Internet companies and many other services where you are trying to get a service and where the owner bears material risk, giving you his property for use, can act as a landlord.
The name of this invention is credit history and credit rating completely related to it. The credit history appears with the receipt of SSN – individual taxpayer number; after that, wherever you indicate this number, there is a risk that the information will go to the credit history and report. Whenever you get a job, sign a rental agreement for housing, apply to a bank for a loan – you always indicate this number. The credit rating was invented in order to quickly and clearly demonstrate the borrower’s reliability, so to speak, his credit reputation. It was developed by a private organization FICO (Fair Isaac Corporation) and the method of its calculation remains the secret of this agency, but there is official information that affects the change in this rating.
A credit score is just a number that ranges from 300 to 850 (in some agencies, from 330 to 830). However, 60% of people have credit score ranging from 664 to 800, and the national average is 723 (USA). It is common knowledge that the higher the rating, the more reliable the borrower is. The credit rating usually rises very slowly; sometimes it takes years to pay off a loan or raise the average age of their credit cards (which significantly affects the rating). But it falls very quickly and for a long time – for this it is necessary to enter at least one bad entry in the report and it will be stored there for years. A loan request stored for two years; collection, up to 7 years old; delay in payment, depending on the terms stored for up to 10 years; bankruptcy, up to 15 years. The availability of such information has a very negative effect on the result when processing your loan application.
Who calculates the US credit rating?
There are three main credit bureaus through which all your information flows – Experian, Equifax and TransUnion. They are the ones who makes up reports for you and calculate the credit rating and, if necessary, provide both to you and to potential lenders. Since the calculation method is not disclosed, it turns out that you have, as it were, three credit ratings, one from each agency, and they can vary up to 30-50 points, which is generally significant. Therefore, before applying for a large loan, it is better to check your reports in all agencies in a couple of months and remove incorrect information if necessary.
Please note that you have the right to check reports from each of these bureaus free of charge once a year. To do this, you need to go to the mentioned website. When you request a report, you will not receive your rating, because this is paid information, but you can check all the information that is in the reports. And this is very important because, no matter how worked out this system is, mistakes happen even in credit bureaus. About 70% of reports each year have mistakes that can significantly reduce ratings.
When it is paid attention to your credit history:
- trying to get a good job (many employers check your credit history);
- you sign an agreement for a certain service – internet, telephone, gas, electricity;
- you want to rent an apartment in your name;
- you want to issue a car loan;
- you want to get a credit card;
- you want to get a mortgage for housing;
- you open your business and rent premises;
- you want to get a loan for education;
- you want to get a cash loan;
- you want to lower the interest rate on existing loans.
Keep in mind, the Credit Score is your credit reputation. It is very difficult and takes a long time to improve it, but you can spoil it in one day. So be very careful, pay your bills on time, do not make mistakes in your credit reports, follow the advice of loan officers and remember that in the future this will bring not only convenience, but also noticeable financial benefits.
Tags: credit score, finance, financial problems, financial reports