Your kids are graduating. They're on their own. But do they know anything about their Credit Score and how important it is to maintain a healthy credit history? I'm sure if you asked them, their response would be "What's a Credit Score?" Well, lucky for you, CreditSoup.com breaks it down for you by answering these 5 valid questions they may have!
In short, a credit score is a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information from your credit reports.
Where do the credit reports come from?
Those reports come from three major credit bureaus in the United States: Equifax, Experian, and TransUnion. They each calculate your FICO score in different ways using the same information. Credit bureaus collect, analyze, and disburse information about consumers in the credit markets.
What is FICO?
FICO, (Fair, Isaac and Company), is a data analytics company based in Bozeman, Montana, focused on credit scoring services. It was founded by Bill Fair and Earl Isaac in 1956. Its FICO score, a measure of consumer credit risk, has become a fixture of consumer lending in the United States.
What is on my credit report?
Your credit report is a record of all loans, debts and credit card accounts you have acquired. This report contains important information, such as payment history, credit limits and dates accounts were opened or closed.
It also keeps track of any accounts you may have defaulted on. Examples would be if you missed a credit card or loan payment, if you have anything in collections such as student loans, or if you maxed out a credit card and the company shut your card off.
So where does the score come from?
The score is calculated by the TransUnion VantageScore. It was developed in 2006 by TransUnion, Equifax and Experian. It pulls information from all three of these companies to calculate the most accurate score possible.
The TransUnion VantageScore scores your credit from 300-850, depending on what you have for payment history, credit usage, credit card balances, length of credit history, age of accounts, & how recently you've used your cards. A low score close to 300 is very bad credit, while a high score closer to 850 is excellent credit.
What if I have no credit history? I'm new to this.
It's very common for some people, especially teenagers that have just graduated high school, to not have any credit. They may only have a bank account with zero loans or credit cards. Thus, their credit score is going to be very low, as they don't have any credit. To help with this, CreditSoup.com offers several types cards to get your credit established.
What this all means.
When it comes down to it, things such as paying your bills on time, and keeping your credit card balances to a minimum will all play a part in obtaining that high credit score. And with a high score, you will be able to get loans on your own, and have a low interest rate on those loans. Keep these things at top of mind when you're starting out on your credit report journey!
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.