Your scores can make or break that loan application you filled out for a new mortgage, car loan, home improvement loan…really just about any type of loan. Many employers review your credit before making hiring decisions. Governing bodies that review applications for professional licenses look at your credit to determine acceptance.
With so much riding on these numbers, it would be helpful to understand how they are derived. Would it not?
Creditors (entities that lend you money) report information from your account (i.e. loan amounts, payment history, balances, etc.) to the main credit bureaus. These bureaus then compile the data from your account(s) and using complex algorithms, come up with a score that represents your overall credit worthiness. Higher is better.
Ugh! Math….I know. But you really don’t need to understand how the formulas work. You just need to know what information the formulas value and how much importance is placed on the various types of information that go into the credit score bowl of soup.
Watch the video below for more….