Everything You Need to Know About Credit Rating

Everything You Need to Know About Credit ScoresThere are organizations that evaluate your creditworthiness and make up a so-called “credit score” or “credit rating” based on data on how regularly you pay your bills, how many borrowed and on other information related with your solvency.

A credit rating in the United States plays an important role in the rental and purchase of housing or a car, as well as for obtaining loans and credit cards.

What is a FICO rating?

The credit rating is also called FICO (Fair Isaac Corporation) rating. It consists of a scale from 300 to 850 points. There are 3 large agents who count the person’s credit worthiness on a point system – these are the credit bureau of Equifax, TransUnion and Experian. Each agency has its own points system, although they differ slightly and give approximately the same rating.

Decoding of the credit rating by points:

  • Magnificent rating = 720 points and higher
  • Good rating = 660 to 719 points
  • Average rating = 620 to 659 points
  • Bad rating = 619 points and below

The higher your rating, the more chances you have for obtaining the desired rental housing, the lower your commission rate for a loan, and the lower the insurance premium for a car.

What is a credit history report?

Credit bureaus collect information from different companies with whom you have had any financial relationship, and create a credit report for every US citizen. This report includes:

  • personal informationĀ  – name, surname, all registered residential addresses and social security number;
  • list of all your bank accounts and payment history for loans and bills;
  • Registered public records, which includes unpaid bills and fines, bankruptcy, lawsuits and tax arrears;
  • inquiries of credit inquiries from various organizations that are usually made when checking your credit history before opening a new card, when renting / buying a house, etc.

A free report on the credit history once a year is available on the AnnualCreditReport website. You will receive all of the above information, except for the credit rating. In order to learn it, you need to pay an additional fee to the credit bureau.
Those who have just arrived in the US and those who have not yet had enough credits in the States do not have a credit history.

Who can view my credit rating?
In addition to you, information about your credit history can be accessed by the following organizations:

  • creditors;
  • insurance companies;
  • tenants who want to test your creditworthiness;
  • credit card companies;
  • To employers (only with your written consent);
  • organizations considering your application for a state license;
  • government agencies to track unpaid child support;
  • state law enforcement bodies;
  • other organizations with which you are going to conduct business or perform financial operations.

Each time any of the above organizations orders a report on your credit history, this is called a “hard inquiry”, so in such cases, oral or written consent from the data owner is usually requested. Such a request implies that you want to increase your debt, so the attitude of the credit bureau to it is usually negative: it takes a few points off your rating, which is saved in your report for two years. When you yourself request a report on your credit history, this is considered an “easy inquiry” and does not affect the rating.

A credit rating is your financial summary, so it is important to know what information is included in it, and to carefully study all its components.

Picture Credit: stevepb

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