Four Facts About Credit Scores Everyone Needs to Know About
March 29, 2019
Credit scores are incredibly important and are taken into consideration every time you make a significant purchase such as a car, or house, or when looking for a job or applying for insurance. But other than that, most don’t know much about them. Many don’t realize whether they have a credit score or not, what makes it up, or how to improve it.
It’s this reason why we’ve compiled a short rundown of what we believe is most crucial about credit scores that everybody needs to understand.
1. Your FICO Score Base On Five Criteria
Even though there are several credit scores in use, the Fair Isaac Corporation credit score (FICO), by far, the most widely used. There can also slight differences with your FICO score, with Experian, Equifax, and TransUnion. The exact mathematical formula used to calculate it is not known to the general public, but we do know that it bases on five broad categories of information as well as the percentages that influence your overall credit score. These are:
- Payment history: 35%
- Amounts owed: 30%
- Length of credit history: 15%
- New credit: 10%
- Credit mix: 10%
2. Employers Can’t See Your Credit Score
Contrary to popular belief, employers can’t access your credit score. Granted, they can and will request permission to see your credit report to determine whether you will make a good fit in certain positions (particularly finance), but they will never have access to your credit score.
3. Millions of People Don’t Have A Credit Score
Though it might come as a surprise to some, it’s entirely possible for not to have a credit score. Millions of people across the country don’t. To generate a credit score, to begin with, you need to have at least one account open for a minimum of six months, and at least one account is to have reported to the credit bureau within the last six months.
As you can imagine, all young people starting their adult life find themselves in this position. It is, however, entirely possible to apply for and get a mortgage with no credit score. It is a process known as manual underwriting, where the mortgage company will take all of your assets and monthly bills into consideration before approving your loan.
4. No Credit is Better than Bad Credit
The purpose of a credit score is for banks and other financial institutions to determine the risk of you defaulting on your loans. And while it’s an uphill battle to secure a loan, a credit card, or to get a fair insurance premium in both scenarios, it’s always better to have no credit than a bad one.
To put it another way, no credit or bad credit means that you don’t have favorable credit, which automatically labels you as a potential risk. Besides, if you have a lousy history, the risk is much higher since you’ve already shown that you are prone to financial mistakes. Those with no credit, on the other hand, can be given the benefit of the doubt. Nevertheless, if you find yourself in either scenario, your priority should be to raise your credit score as fast as possible.
If you need a fast loan but can’t secure one, Illinois Lending Corp is by your side. We don’t require any credit checks and will approve your loan on the same day. Give us a call at 1.877.LOAN.195 or apply online today!