A credit report score is a numerical value determined by the analysis of credit files of an individual. It shows the creditworthiness of an individual. It is initially based on the credit reports of the individuals taken out from credit bureaus.
Lenders like credit companies and banks make use of the score to do evaluation of the possible risk of lending the money. Lenders make a use of these scores to decide who will qualify for the loan and also the interest rate. They also use these scores to decide that which customer will bring the maximum revenue.
These scores are not restricted to banks only. Many other organizations like cellular companies, property owners, insurance companies and other companies also make a use of these scores. In the United States, these scores are based on the information of the credit report obtained from the top 3 credit agencies. Typically, income is not taken into account by top credit bureaus when they are calculating the score.
There are different methods by which the scores are calculated. The most common method of calculating it is FICO. This method is taken into use by mortgage lenders who make a use of risk-based analysis to decide the possibility that the borrower may get default. Every credit bureau has its own credit score as Equifax has its own score, Experian has its own credit score and TransUnion has its own score.
These scores are important for every individual as they play an important role in managing your credit and protecting against identity theft. With the help of these scores, you can get access to your credit fluctuations and any fraudulent activities on your credit report. If you witness any such activity on your report that you are not aware of, then you can take action against those activities and stop them.
Your credit report score also helps you understand the effect of several financial decisions on your report and on your loans and credit cards. These scores are extremely important for every individual in the US so that they stay updated with their credit information. An average FICO score starts from 350 to 850. If your Fico credit score more than 730, then it is an excellent score. If your score lies in the range of 700 to 729, then it is good credit. If your score is in the range of 670 to 699, then it is an average score. But if your score is in the range of 585 to 699, then it is higher risk and you will be less likely to get a loan or mortgage loan with this score. If you have an excellent credit score, then you have high chances of getting a loan and that even at a very good interest rate. This score is helpful in every financial phase of an individual’s life and is very useful.