Debt Consolidation Credit Counseling In Phoenix

When you apply for credit, one of the first things a lender will check is your credit score. If you know what your credit score is before you apply, you'll have a better idea of what to expect in the loan process.

So what is a credit score -- and why is it important?

A credit score is simply a number calculated by the three major credit bureaus that indicates how well you handle credit. This is done by reviewing your past credit history and looking at how you are doing with any current debts as well.

The three major credit bureaus are Experian, Equifax, and Trans Union. Each one has it's own method of deciding what your credit score is. Then they use a scoring system to show how good you are at handling credit and paying your bills on time. They all use the same scoring system - FICO - which is an acronym for Fair Isaac Corporation. That's why many people will use the terms "credit score" and "FICO score" interchangeably.

The truth is, lenders won't always ask for credit reports or credit scores from all three credit bureaus when you apply for a loan. Fortunately, since the "big three" all use the same FICO system, a score of 680 from one is thought to be the same as a score of 680 from the other two credit bureaus. Even so, it's a good idea to review your credit report from each one, as sometimes mistakes are made. When that happens, you should contact the credit bureau to have them corrected.

Where Do You Fall - What Is A Good Credit Score?

Your credit score can range from 375 to 900 points. The higher the number, the better you are. Getting credit will be easier, and you'll likely get better loan terms as well.

You should understand that each lender will have their own underwriting guidelines and cutoff points they have to follow. But here is a general guideline you can use to see where your credit score falls overall.

If you have a credit score of 650 and above, you probably have a very good credit history. Because you've been responsible in the past, you will probably find the approval process is quick, easy and painless. An added bonus is that your loan terms and interest rate will probably be very good.

Scores between 620 and 650 are considered average. This means your credit is basically good. If you fall into this range, lenders will tend to look for any possible credit risks before approving a high credit limit or large loan amount. You may find you have to provide additional documentation and explanations when applying.

Also, instead of being quick and easy, your loan may take longer to close. But there is a good chance you will still be able to get credit at a good rate.

If your credit score is below 620, this doesn't necessarily mean you won't get credit. But you should realize that the interest rates and terms of your loan will probably be less desirable, due to your low credit rating.