Dollars and Sense: Credit Score Challenge
Your credit score plays a large part in whether you can buy a house or car. In certain circumstances, it even affects whether you can get a job. But where does the number come from?
A credit score is:
- a three-digit number summarizing the state of your credit
- an alphabetical score grading your creditworthiness
- a numerical score reporting how much money you owe
A credit score helps a lender determine:
- how much money you owe
- how much money you make
- whether you're a good financial risk
The main type of credit score is called FICO because:
- It stands for "Finances, Income, Credit, Outgo."
- It originated with Fair Isaac and Company.
- It's an acronym for "fiduciary company," or a company entrusted to protect another's assets.
Credit scores range from:
- zero to 100
- 300 to 850
- 100 to 1,000
The biggest factor in your credit score is:
- whether you pay your bills on time
- how much debt you have
- how long you've had credit
You can improve your credit score by:
- closing any unused lines of credit
- reviewing your report regularly and correcting any errors
- refusing to use credit for any purchase
Your credit score affects:
- whether you can get a loan
- your interest rate
- both A and B
Insurers have used credit scores to determine insurance rates because:
- People who have good driving records also have good credit.
- Research shows a correlation between lower credit scores and increased insurance claims.
- People who have good finances are in better health.
To keep your credit score high, you should keep old credit accounts active because:
- You may need the money someday.
- The higher your total credit limit, the higher your score.
- The length of your credit history affects your score.
Inquiries from lenders to the credit bureau will:
- raise your score
- lower your score
- not affect your score