A credit rating is a number that is assigned to you indicating how good your credit is. It is comprised of all of your past experiences with debt and loans that you may or may not have paid within the confines of the contract you had originally signed with any of the many companies with which you might have done business. As a score, it can make a difference of a few hundreds extra dollars a month when applying for a mortgage. .
A credit score is determined by the number of credit cards you owe on, how you pay your bills and past credit history. This information is put into formulas that tell a lender what kind of a risk you are. Information is usually gathered from one of three credit bureaus – TransUnion, Experian and Equifax. Fair Isaac calculates using FICO credit score ranging from 300 to 850, with 850 being the best score one can possibly get.
As noted, a credit rating is one component in evaluating a person’s credit. If you are applying for a loan, a lender will look at your payment history, your income and earning potential, and the amount of debt that you currently own. If you have a spouse or are borrowing with another person, if you both have scores of 660, you can generally get very reasonable interest rates. When applying for a mortgage, the higher your rating, the better your chances of getting the loan at a lower interest rate will be. If your credit rating is slow, you may still get a mortgage or refinancing loan, but your interest rates will be higher.
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