If you are thinking of applying for a loan, it will be a good idea to first check where you stand on the credit score scale.
Why? Because knowing where you are on the scale can have a huge effect on the interest rates you’ll get.
Generally speaking, the higher your score is, the lower the risk is to the lenders and the easier you’ll obtain a loan of any sort. While a low score could result in much higher interest rates or having your application rejected outright.
Understanding credit score scale
As people are becoming increasingly dependent on credit, neglecting the importance of credit score can be very costly. This magical number says a lot about your credit worthiness. It can either save you money or cost you money.
In fact, getting loan of any kind is almost impossible nowadays without a decent score. That is why it is important to understand the credit score scale, what is considered a good credit score and where you are on the scale.
I have seen someone ignorant of his credit score and was rejected for a loan application for the umpteenth time as no lender was willing to take the risk to loan any amount to him. And even if he were to get the loan, the interest is likely to be significantly higher as the lenders will want to offset the risk of lending due to his poor credit score. See the true cost of a low credit score.
In laymen term…
Credit score is a 3-digit rating that shows your likelihood to repay the loan you borrow in a definite length of time. Before giving out the loan, your lenders request a credit report from one of the three credit reporting agencies such as Experian (formerly known as TRW).
This credit report reveals your personal information, financial history and of course how well you manage your debts and finance in the past (see also TRW credit report). Basically it implies how wisely you have used credit in the past and how likely you’ll continue to do so in the future.
Your credit score is computed based on a subset of information within your credit report which a lending institution will use along with other factors when determining the risk factor when you apply for a credit card or request for a loan.
Although by law, you’re entitled to receive a free copy of your credit report annually, this free report will not reveal your actual credit score. In order to review your actual score to see where you are on the scale you will have to pay a fee to obtain your score.
Although by law, you're entitled to receive a free copy of your credit report annually from any of the 3 credit bureaus - Equifax, Experian, and TransUnion, this free report will not reveal your actual credit score. To view the actual score that the lenders are seeing, get your score (plus 3 in 1 credit report) from creditreport.com for a free trial.
