Before I delve into this issue, let’s go into what a credit score is. According to popular online “dictionaries” such as Wikipedia, a credit score is a numerical expression based on a statistical analysis of a person’s credit files, to represent the creditworthiness of that person, which is the perceived likelihood that the person will pay debts in a timely manner. Blech! What a mouth full!

Let’s see if I can put that into Layman’s terms. Lenders, such as banks and credit card companies, use your credit score to evaluate the potential risk posed by lending you money. Lenders use your score to determine if you qualify for a loan, at what interest rate, and how much to lend you. Basically, it is to determine how worthy you are of their trust, and how likely you are going to pay your bills on time.

As you may already know, credit scoring is not limited just to banks. When you apply for a mobile phone plan, purchase homeowners or auto insurance, or apply for a new job, you must “pass” a credit check. Your credit score seems really important now, doesn’t it?

In the United States, your credit score is primarily based on credit report information, typically from one of the three major credit bureaus: Experian, TransUnion, or Equifax. Get Your Equifax Credit Report Now!

There are different methods of calculating credit scores. The most popular is the FICO score, which was developed by the Fair Isaac Corporation. The FICO credit score ranges between 300 and 850. It is used by many mortgage lenders, that use a risk-based system to determine the possibility that you, the borrower, may default on financial obligations to them. The credit bureaus all have their own type of credit scores: Equifax’s ScorePower, Experian’s PLUS score, and TransUnion’s credit score, and each also sells the VantageScore credit score.

Americans are entitled to one free credit report within a 12-month period from each of the three agencies. The three credit bureaus run Annualcreditreport.com, where you can get a free credit report, but normally without credit scores. However, for a fee, your score is available as an add-on feature of the report.

Have you been denied credit recently? In California and Colorado, you are entitled to a free credit report within 30 days of being denied credit. Forward the rejection letter along with a short letter to that particular agency, and a report will be on its way to your door in a few weeks.

So what are you waiting for? Sign up for your first credit report, find out your “number,” and let me know if everything is in order!

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