Credit Score: Checking your history or score will not hurt your credit.

Insurers use scores to base your monthly insurance rates. Credit scores may also be used by landlords and prospective employers , who view your score as a representation of your stability, and therefore, whether or not they feel confident doing business with you. Insurance laws require that insurance rates be based on causation, or “actuarial evidence”. This means a statistical relationship between two factors must be proven. For example, the fact that a person who has a lot of speeding tickets will have more accidents has been statistically proven, but no statistical relationship has been found between credit scoring and insurance risk. Insurance companies, landlords and cell phone companies may also view your credit report, and might deny you services if your history isn’t favorable.

Consumers can buy a report on their credit scores, but these scores vary – sometimes widely – depending on when, where and how they get them. The scores consumers get can also be different from the scores lenders see. Consumers also benefit from this method. No matter who you are as a person, your credit score only reflects your likelihood to repay debt responsibly, based on your credit report. Consumer advocates say it’s important for borrowers to know what can damage their FICO scores. They won’t go out and do some of these things,” says Linda Sherry, director of national priorities with advocacy group Consumer Action.

Consumer reporting agencies and other companies sometimes use an estimated score to illustrate a consumer’s general level of credit risk. How might you tell whether a score is estimated? Consumers with higher FICO scores are considered to be less risky by lenders. The FICO score is derived from a formula that was created in the 1950s by Fair Isaac and Company as a way to help lenders to more accurately and more consistently measure the credit risk associated with borrowers. Consumers can get a free report from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion. Obtaining an actual credit score may cost consumers a few dollars, but for those who don?t know or are concerned about their credit score, the cost is minimal compared to the cost of not getting a loan, paying higher interest rates, or not being considered for a new job.

FICO scores are not the only credit agency scores. In addition to FICO, the three agencies may use different scoring models, although FICO scores are most commonly used in mortgage lending. FICO, the most widely known type of credit score, is a credit score developed by FICO, previously known as Fair Isaac Corporation . It is used by many mortgage lenders that use a risk-based system to determine the possibility that the borrower may default on financial obligations to the mortgage lender. Fico, the company, and the major credit bureaus charge you for your Fico score.

FICO Scores are calculated from a lot of different credit data in your credit report. This data can be grouped into five categories as outlined below. FICO likes to see that you’re still using credit, but doing so responsibly.

Bank

Banks will reject you if you have disputed items on your credit report, until it resolves. It can take 60 days to clean up your credit score, so don’t apply for new auto financing until all disputes are resolved and you verified your FICO Score. Banks are required to keep a certain amount of cash reserves on hand. When their reserves run low, they are less willing to hand out money, and when they do, they want a better likelihood of payoff.

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Banks will reject you if you have disputed items on your credit report, until it resolves. It can take 60 days to clean up your credit score, so don’t apply for new auto financing until all disputes are resolved and you verified your FICO Score. Banks are required to keep a certain amount of cash reserves on hand. When their reserves run low, they are less willing to hand out money, and when they do, they want a better likelihood of payoff.

Recent advice includes: Going over the limit on your credit card . Recently, after years of on time payments and a good credit rating, Chase not only upped my interest rate by 6 points, but it lowered my limit by $2000. When I called to inquire why the changes were being made, they basically said it was just business and was affecting all their clients! Recent opening of new credit accounts. Having several new credit accounts can lower your credit score.

Recent inquiries means that you have accessed your credit and this can affect your score negatively. She adds that if you are shopping for a major purchase, such as a mortgage or car loan, the inquiries will usually roll together into one.

Increasingly, credit scores are being used for purposes other than determining whether you will default on a loan or make late payments. For example, some insurers are using low credit scores as indicators to identify individuals they believe are more likely to make claims against their insurance policies. Increasingly, lenders are trying to fund loans with prices (rates, fees and terms) that more precisely match your risk. In theory, someone with a 850 score should get much better rates than someone with a 650 score.

Check the reports and if you find mistakes, fill out the simple form to dispute them. Check your credit report regularly. Correct any incorrect information you find on your credit report as quickly as possible. Check your last statement to see which day of the month that typically is, then go to the issuer’s Web site about a week in advance of closing and pay off what you owe. It won’t raise your reported limit, but it will widen the gap between that limit and your closing balance, which should boost your scores.

Lenders use your credit score to judge how likely you are to repay a loan. A poor credit score may mean your loan application is rejected . Lenders use your credit score to determine approvals, interest rates and loan amounts. The higher your credit score, the better your interest rates. Lenders will often allow you to borrow more than 80 percent of the value of your home, and may not require private mortgage insurance. You will likely be able to get a home equity loan or line of credit with an interest rate equal to the prime rate, or even below it.

Lenders look for trends. Lenders and other institutions argue that credit-scoring systems provide a consistent, mathematical system to evaluate individuals. Institutions argue that a credit score is superior to the previous method of evaluation by a loan officer because the loan officer was given too much discretion, which gave rise to problems such as bias. Lenders are concerned with the credit score of the borrower whose income they are depending on to service the loan.

Lenders want to advertise the lowest prices possible, so they base their posted prices on favorable assumptions. One of them is that the borrower has good credit.