What Credit Score Ratings Are and How They Affect You

Television commercials offer deals to get information on your credit score ratings.  Everyone knows that these ratings affect them somehow.  Many people do not know exactly what these ratings are or how serious they are. 

Credit score ratings are based on credit reporting software made available to all three reporting agencies.  These are Experian, Equifax, and TransUnion.  These agencies take the raw data and produce a score, which is called the FICO score. 

The data used for your FICO score will include your payment history, the amount of money you owe, and the places you owe it.  The FICO score will be used by people in businesses you deal with often.  These businesses will use your credit score ratings to determine whether they can trust you to pay. 

Your FICO score can be anywhere from 300 to 850, but be aware that you may get different credit score ratings from all three of the agencies.  Do not be taken in by companies that offer you free yearly credit reports if you sign up for their other services. 

You are allowed by law to get your credit score ratings from the different agencies once a year.  The only thing you have to be careful of is to make sure you are dealing with the legitimate website.  Some fake websites have been set up just to get your personal information.  Once you know a good place to get credit score ratings, you might want to get them about once a quarter.  This will alert you to any identity theft that is happening. 

As to how credit score ratings affect you, they do so in many ways.  The obvious ones are when you try to obtain consumer credit, car loans, or a mortgage.  That is not to say that you cannot have these items without good credit score ratings.  It only means there will be a price to pay. 

For car loans and mortgages, you may need a co-signer if your credit score ratings are low.  A larger down-payment will almost certainly be required.  Your interest rates will be higher on any type of loan you get with bad credit. 

There are other less obvious uses of credit score ratings that can affect your life.  For one thing, insurance companies will often do a credit check.  They will take this information into consideration when assessing your premiums. 

Utility and cell phone services use credit score ratings, too.  If you have a low rating, the gas, power, or Water Company might demand a large deposit before they will turn on the utilities to your house or apartment.  Cell phone companies actually offer better deals to people who have higher credit score ratings. 

Landlords check credit score ratings to find desirable tenants.  They can deny housing to or ask large deposits of renters.  Employers are even beginning to do credit checks.  This is especially important to them if you deal with money. 

Credit score ratings can be your friend or your enemy.  You can guard yours by paying your bills on time and not taking too many credit cards or loans.  If you keep high credit score ratings, you will find the world a much friendlier place.