What in the United States is known as Credit Score is, basically, the score that an individual has in terms of credit. If our behavior in regard to money was an exam, the credit score would be the rating we obtain in it.
It is a number, used by lenders (banks, financial institutions, car dealers, employers, etc.) to determine how likely it is that the person returns the money that was lent to him, how responsible he is, and his financial situation.
This credit score reflects the situation of the individual’s finances at a certain time. The figure is based on the information that exists about our financial situation and the status of our debts. There are numerous organizations and companies that dedicate themselves to granting these scores, the most used and famous is the one developed by a company called Fair Isaac, it is known as FICO score.
What is a Credit Score?
This number with which we are rated is based on the information that exists about our credit history (seniority, credit cards, loans, debts and payments). The better our loan and credit history is, the more responsible we have been in relation to the return of money that was lent to us and the more tidy with respect to our finances, the higher our score will be.
Depending on our score, we can get a more or less convenient interest rate. Generally, when the score is low, the interest rates are higher, because a low score means that our credit behavior is not reliable enough to obtain the benefit of a low interest rate.
The subject of the score is used to evaluate an individual when requesting any type of credit, from loans to buy a house or a car, to credit cards and personal loans. In some cases, it is even used to analyze whether a person is qualified to obtain a certain job or not.
Agencies that prepare credit reports
In the USA, the main agencies are three: Equifax , Experian and TransUnion . These companies provide to those who request it (lenders, banks and / or employers) the credit score or FICO of an individual.
Each of these agencies uses a different method for the evaluation of our situation and the granting of a qualification. But basically, they are all based on the same information: whether we pay our bills on time or not, if we ever declare bankruptcy, how much money we owe, how long have we had a credit history in the United States, how many credit cards do we have and With what limit, and everything that can determine how we manage our money.
The evaluation that these companies perform on all these data, have as a result a number, a score. It is this number that is known as Credit Score or FICO Score.
The importance of Credit Score
In the United States, the credit score is important. In fact, there is no other country in the world where the credit history and this type of scores have such importance. This is because, in general terms, the domestic economy of this country is supported by the culture of debt. As a result, the credit history is given a lot of importance in the US.
Loans and credit cards
In most societies around the world, “borrowing” has a negative connotation. This is not the case of the United States; It is a country in which there are 400 million credit cards circulating and one out of every 3 university graduates finish their studies with an average debt of 30,000 dollars. The average credit card debt in a typical American home is $ 16,000.
The culture of debt
Although the United States is considered one of the most powerful countries in the world, it is also the one that owes more and which has a greater part of its indebted population. According to several studies, most Americans believe that they will be in debt all their lives; among them, 45% say that they will not be able to pay their debts until after 60 years of age, while 20% believe that they will never be able to pay them.
This characteristic of the American culture is what transforms the credit score issue into something central. The fact that it is so common to get into debt and that there are so many debtors makes the evaluation process much more exhaustive and specific.
Having a good credit history and a good FICO score increases our chances of obtaining loans and low interest rates; This means spending less money and, therefore, more possibilities to grow economically.
Fraud
As we told you in a previous post, credit card fraud and identity theft are very common problems in the United States. What does this have to do with the credit score? All. If our identity is stolen, a loan is requested on our behalf, credit card expenses are incurred without our approval, or something is purchased in installments, the impact on our credit score can be devastating.
When looking for work
As if the impact of our Credit Score was not enough with everything already mentioned in this post, sometimes, employers also check the credit history of candidates to get a job. They assume that a person who manages their finances responsibly will also be responsible at work.
As we explained in previous posts, finding and finding work in the United States as immigrants is often difficult. There are differences with the Latin American countries, both in the interview to obtain employment, and when putting together the resume or resume . It is important to be attentive to anything that has to do with our credit score , since some problem in this regard, can make the job search even more difficult.
If you suspect your identity has been stolen, or there are expenses on your credit card that you did not make, contact your financial institution and cancel your credit cards as a first step. As a second step, get advice from a professional.
In these cases, it is very important to seek legal help. You should be advised by a lawyer who knows these cases well, who will know how to protect your rights as a consumer. A professional will help you handle the situation, protect you from further damage and help you solve your problems with creditors. A lawyer can also help you clean up your reputation after the incident, which in some cases is not easy.