Your credit scores, also commonly known as FICO scores, are a numerical grade of your credit performance and profile. Many consumers fail to realize how important their credit scores are until they have applied for credit and find out that their scores are too low for consideration or for the best loan terms. Only then do they realize the importance and the need to learn how to improve credit scores.
Why Are Creditors So Focused On Credit Scores? The algorithms and formulas used to derive your credit scores are very complex and take into consideration vast amounts of credit information. Not only does it consider your payment history, but it also evaluates the way you utilize and manage your credit with free credit report. Creditors used to manually review an applicant's credit report and other references, which was a labor-intensive and time-consuming endeavor. When faced with thousands of potential applicants, creditors would be easily backlogged if they had to manually review each applicant's credit history.
Now the credit score comes along and it packages all that analysis into just one number. The creditor can spend less time and have fewer employees reviewing credit applications to make a credit determination. Creditors generally set guidelines on the minimum credit score they would accept from an applicant. They even take it a step further and use an analysis called risk-based pricing to tier the rates based on the applicant's credit score. Credit scores are now the main driver in credit reviews with free credit report, and it's in the consumer's best interest to learn how to improve credit scores.
Are Consumers Left In The Dark About Credit Score Requirements? Creditors do not generally publish their minimum credit score requirements or indicate what score is needed for the best rates. That is why it is so important for consumers to learn how to improve credit scores. Having a high credit score improves the consumer's chances for the best rates and will save them money in the long run.
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