When you use credit, you are borrowing money that you promise to pay back within a specified period of time.
A credit score is a statistical method to determine the likelihood of an individual paying back the money he or she has borrowed.
What’s a FICO score?
A type of credit score that makes up a substantial portion of the credit report that lenders use to assess an applicant's credit risk and whether to extend a loan. FICO is an acronym for the Fair Isaac Corporation, the creators of the FICO score
Who keeps track of your credit rating?
An agency that researches and collects individual credit information and sells it for a fee to creditors so they can make a decision on granting loans.
Three major credit bureaus in the U.S. (Equifax, TransUnion, and Experian) may issue differing scores for an individual,
What makes up your credit score?
From the information in the credit report, the bureau determines a credit score based on five major factors:
1) previous credit performance-did you pay your bills on time? 2) current level of indebtedness, 3) time credit has been in use, 4) types of credit available, and 5) pursuit of new credit.
Why your credit rating is important
When you apply for a new credit card, a new job, car insurance, even a phone hookup, or renting an apartment, your credit rating is checked.
Basically, if you have a poor credit score, lenders will not shun you (unless it is utterly awful); instead, they'll lend you money at a higher rate than the one paid by someone with a better credit score.
Credit Score-Mortgage Rate-Monthly Payment
"The Importance Of Your Credit Rating." Investopedia.com - Your Source For Investing Education. Web. 08 Nov. 2011. <http://www.investopedia.com/articles/00/091800.asp>.