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Your credit score is the financial picture you present to lenders and creditors. Based on the information contained in your credit report, you are assigned a credit score.
With a low credit rating, you will find it difficult to get approved for a loan or credit card. A higher credit rating gives you the ability to take out a suitable loan with a lower interest rate.
Credit scores range from 300 to 850, with the top tier credit score in the range of 760 to 850. Borrowers falling within this range are considered to be low risk borrowers. 620 is the most average credit score.
A credit report contains the history of how you have paid your bills, how much credit you have, and anything else that affects your creditworthiness. Your credit score boils down all that information into a three-digit number. Using your credit score, lenders can predict with some accuracy how likely you are to repay a loan and make payments on time.
Until recently, only lenders and other businesses that used credit could access it. Fair Isaac and Company, which developed credit scores, felt that the score would only confuse consumers since there was nothing to tell them what it meant or what lenders were looking for.
Since 2001, thanks to Congressional Credit Industry and Consumer groups, everyone can view and monitor their credit score online. You can order one free credit report once a year at www.annualcreditreport.com or call 1-877-322-8228. For more information about getting your credit report you can also visit www.ftc.gov/bcp/edu/pubs/consumer/credit/cre34.shtm or contact the Federal Trade Commission Consumer Affairs Department for a fee from credit reporting agencies and credit monitoring services.