10 May Is good credit really that important?

It’s probably not a surprise to anyone that cancer can negatively affect someone’s credit.  But what does that actually mean?  Having good credit is imperative in today’s world.  Credit may be checked when someone tries to rent an apartment, lease or buy a car, buy a home, or even get cable television. In addition, in some states, during the job application process, employers can conduct background checks that include looking at an applicant’s credit score or full credit report and may make character judgements based on information in the report.  Therefore, it is important for individuals to learn their credit score and check their credit report on a regular basis.

A credit score is a three digit number determined by looking at five main categories of your financial history: debts owed, new credit applications, length of credit history, type of credit used, and payment history.  The score is then used by lenders to predict one’s financial risk.  The most widely used credit score is the FICO^© score.  FICO scores range from 300 to 850, a higher number means you are more creditworthy and less risky.

The three largest national credit bureaus are: Equifax, Experian, and TransUnion.  Your FICO score may differ among the three credit bureaus.  There are smaller Credit Reporting Agencies (CRAs) that provide specialized consumer reporting services that report payment data for services such as phone, electricity, and cable.

Periodically, FICO releases new versions of its scoring that calculate various types of debt differently.  For example, FICO 8^© weighed high credit card limits more than the sporadic late payment. The most recent version, FICO 9^©, released August 7, 2014, made significant changes in the way it regards medical debt.  In previous versions, FICO did not distinguish between medical debt and other types of unpaid debt.   FICO 9^© puts less emphasis on unpaid debt due to medical bills as compared with other types of unpaid debt, and will not take into consideration accounts in collections that have been paid in full.

For more information about FICO scores visit, www.myFICO.com or our past post on FICO ® Score – What is it and What Does It Mean for You?

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