Your next big goal is to get a house, and you are planning to use credit for your purchase. Getting the amount of money required from financial institutions is mainly based upon your credit score.
If your credit score is high enough, it is one of the key parameter lenders will use to make a decision on whether or not you qualify for credit and the interest rate that for the finance. Because of this, it is important that you take your credit scores very seriously.
An important step in taking your credit score seriously is knowing as much as you need to know about it. In this article, we have explained what you need to know about credit scores.
Ready? Let’s go.
How Do Credit Scores Work?
Credit scores are basically numbers that tell lenders how creditworthy you are, and what chances they have that you will repay the credit you get from them. The system of using credit scores was invented by the Fair Isaacs Cooperation, and as a result, their FICO model of credit scoring remains the most widely used by lenders. There are others, such as VantageScore, TransRisk, etc, but this article will be focusing on the FICO model.
The FICO model of credit scores ranks creditworthiness in a range of 300 to 850. The following table shows the different breakdowns within the range.