Your Tampa CPA Discusses Credit Scores and Why They’re Important

A credit score is a numerical measurement of how you’ve managed credit in the past and how you are likely to manage credit in the future. Lenders use a credit score to gauge the risk of default and to determine an interest rate. These factors make your credit score an important, but by no means definitive, window on your financial health.

Your Tampa CPA at Reliance Consulting, LLC can help you understand the ins and outs of your personal or business credit score, including how it is derived and why it is important. Any time you apply for a loan, the lender will run a routine “credit check.” For personal loans, this usually means acquiring reports and credit scores from the three major credit bureaus: Equifax, Experian and TransUnion. Primarily, though, a lender is most interested in your FICO score, a number in the 300-850 range that is generated by the Fair Isaac Corporation (FICO) based on the following factors:

• Payment history (35 percent) – credit card payment delinquencies, bankruptcy, mortgage defaults
• Amounts owed (30 percent) – outstanding balance versus credit limit
• Credit history length (15 percent) – longer history generally is helpful
• Types of credit used (10 percent) – credit cards, retail accounts, mortgage, installment loans
• Recent credit use (10 percent) – new accounts opened, frequent credit inquiries

Your Tampa CPA at Reliance Consulting can help you improve your credit score by providing sound advice as you navigate your personal and business finances. According to FICO, a score of 723 is the mean credit score in the United States. A score of 720 or better is considered good. While a poor credit score won’t necessarily prevent you from borrowing money, a good credit score can, for example, help you negotiate for a better interest rate on a home loan.