No one likes being a statistic. We are all snowflakes with unique interests and passions. We love and are loved. We don’t like thinking of ourselves as a number. However, there is one number that follows each and every adult in this country for their entire life. Their credit score.
Like it or not, you will always have that number associated with your name. Well, technically quite a few numbers. The most commonly used score is the FICO score. Then on top of that, other companies have started creating their own scores as well: VantageScore, CE Score, Scorex Plus Score and more.
Generally people concern themselves with their FICO score first and foremost, but those numbers will inform any inquiring party with an at-a-glance statistical overview of someone’s creditworthiness. Debt, timely repayment of loans or defaults, lines of credit, even repeated inquiries of your credit score could affect that number.
Since the score is the culmination of the financial decisions made by the individual, it is up to that individual to manage the score’s overall trajectory.
In the eyes of the Federal Trade Commission (FTC), "…credit scoring systems generally enable faster, more accurate, and more impartial decisions than individual people can make." Since the score is the culmination of the financial decisions made by the individual, it is up to that individual to manage the score’s overall trajectory. Most institutions will treat the borrower's credit score as a direct indication to the likelihood that borrower will payback what gets lent to them. The higher that number is, the better the chance of repayment in the eyes of the lender.
While it may seem imperative to seek a perfect credit score, there may still be options for those with less than perfect credit. And the FTC reminds us that “…some creditors design their systems so that some applicants — those with scores not high enough to pass easily or low enough to fail absolutely — are referred to a credit manager who decides whether the company or lender will extend credit.” Meaning you're not completely out of luck to secure a loan or line of credit if you have a less than stellar credit score. Your mileage may vary, and it is important to remember that everyone’s situation is unique like the snowflake they are.
While there are countless words of advice on how to raise your credit score, the best advice is to understand that there are cumulative effects of your life’s decisions. Your credit score lives and grows along with you, with each purchase, each payment, and every financial decision you make. Be mindful of your credit score and in your time of need it will be there to help you along in the process of potentially becoming a homeowner.
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