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Credit Score
What It Is and How It Affects Your Financial Future
By Debra Weaver
There is one number that is very important to your financial future. This number determines if you can buy a new car, get a student loan or buy your first home. It is called your credit score.
"A credit score, commonly called a FICO score (Fair Isaac and Company, founders of these scoring measures), is a numerical designation that determines your level of credit worthiness." says Norm Bour, host of his own nationally syndicated radio show, The Real Estate and Finance Show.
The score is derived by a number of different factors. "Scores are determined by the length of time credit history has existed, payment record, number of accounts and balances on those accounts," Bour says. "The scale goes from approximately 350, which is horrible credit, to anything over 800, which is exceptional. With that type of score the borrower has clout to get whatever they want in the credit world."
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Not only does a high credit score make obtaining credit easier, it can make a difference in the interest rate you will be offered. The higher your score, the lower your interest rate will be. With a long-term loan like a mortgage, this difference can amount to thousands of dollars saved on interest.
So using credit wisely can get you the best deals. But what if you fall behind on payments? Maybe you've lost your job, gone through a divorce or have high balances on several credit cards. Are you doomed to never being able to afford a home or a new car? Not necessarily. There are some ways to improve your credit score.