About Your Credit


Have you ever wondered what a credit score is? How it is calculated? I know these thoughts have crossed my mind a time or two.


Very basically, your credit score measures how responsible and "safe" you are for entities like banks and other lending organizations to lend money to. They want to know, at a glance, how likely you are to pay them back should they lend you money. Certain proprietary criteria are used by a few companies to analyze your history with debt and other money uses to give you what we call a credit score. The higher the number, the more comfortable a lender can feel that you will responsibly pay back the loan with the interest agreed upon.


To build this value, there are three companies that look at your lending history, or your credit history. These companies are named Equifax, Experian, and TransUnion. Together we tend to call them the three credit bureaus. These are the entities responsible for your overall credit score. Each company gives their own score and it can be different between them. You may have a suitably high score at one bureau, and a middling score at another.


In a nutshell, a credit score is their measurement of you regarding how well you borrow money so you can be more easily approved to borrow more!


As you start to pay more attention and learn more about your credit, I strongly encourage you to go to annualcreditreport.com and get your free credit report from all three bureaus. This is a complete credit report and you are entitled to one each year. Being informed about your current credit situation is incredibly important, especially while you are trying to figure out where you want to be with your credit.


One last thing, I also encourage you to mark on your calendar a time when you will get a new free credit report from annualcreditreport.com. Take some time to review it each year. Perhaps even save each report so you can compare one year to the next. It should be quite helpful in tracking whether you are still heading to where you want to go!