Credit Score, And Why Is It Important For Your Future Success?

848 WordsJun 20, 20164 Pages
What is your credit score, and why is it important for your future success? Describe and demonstrate knowledge of credit scores The word credit has its origins on the Latin word “credere”, meaning “to place one 's heart; to trust, believe” (http://www.oxforddictionaries.com/us). A credit score is a number between 300 and 850 that shows lenders the capacity of a borrower to repay loans (http://www.oxforddictionaries.com/us). The FICO score was first introduced in 1989 by FICO, then called Fair, Isaac, and Company (source). VantageScore exists as a competitor of FICO score since 2006. It’s been said that capacity was reputation-based in the past -mouth to mouth- which made it hard to judge fairly a person because business’ owners and lenders used to take into account the character of a person (specific habits, etc). So the concept of credit score was invented as a way of making fair decisions for lenders to improve business decisions. It consist on formulas -that evolve with time- that are based on the information of millions of consumers from three key areas of their credit reports: your credit accounts and repayment information (including credit cards, auto loans, student loans, mortgages and rent), public records (such as tax liens, collections or bankruptcies) and inquiries (requests by lenders to access your credit information when you apply for credit). (www.chase.com). There are three national credit bureaus in the U.S. that capture, update and store credit
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