A lot of people don’t realize how a low credit score (credit scores run from 300-850) can really cost you a lot of money. Any time you apply for credit, the company you are applying at will normally pull a credit report and score from one or all three of the major Credit Bureaus.
This credit score will help the company judge the risk of loaning you the money. It doesn’t matter if it’s a car, washing machine, or home mortgage. Now each company may have it’s own system but a big part of the risk analysis is based on your credit score.
Most credit bureau scores used in the U.S. are produced from software developed by Fair Isaac and Company. FICO scores are provided to lenders by the major credit reporting agencies This system has gained more popularity in recent years and now each of the three main credit bureaus licenses Fair Isaac’s system for generating credit scores.
FICO scores are the credit scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus: Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you. As this information changes, your credit scores tend to change as well. Your 3 FICO scores affect both how much and what loan terms (interest rate, etc.) lenders may offer you.
FICO scores are based on 22 pieces of data collected by the three major credit bureaus, Equifax, Experian and TransUnion). The lowest possible score is 300, while the highest is 850.