Credit Scores and You - What Is A Good Credit Score?
Are you thinking about applying for credit? Whether you're buying a new car, getting another credit card, or refinancing your home, one of the first things your lender will do is check your credit score. This score will determine just how quick and easy it will be to get the loan. That's why it's always good to know what your current credit score is... before you approach a lender.
So what is a credit score -- and why is it important?
Your credit score is a number the credit bureaus use to rate just how credit-worthy you are. They look at both your past credit history and how well you are handling any current debt you may have.
Trans Union, Equifax, and Experian are the three major credit bureaus lenders use. Each credit bureau has their own way of calculating your credit score, but they all report their scores using the same scoring method: FICO. FICO is short for Fair Isaac Corporation. Don't be confused if one person uses the term "FICO score" and another uses "credit score" -- they both mean essentially the same thing.
The truth is, lenders won't always ask for credit reports or credit scores from all three credit bureaus when you apply for a loan. Fortunately, since the "big three" all use the same FICO system, a score of 680 from one is thought to be the same as a score of 680 from the other two credit bureaus. Even so, it's a good idea to review your credit report from each one, as sometimes mistakes are made. When that happens, you should contact the credit bureau to have them corrected.
Credit Score Ranges - What Is Considered A "Good" Credit Score?
Credit scores range from a low of 375 to a high of 900. If you have a higher score, you are usually considered a better "risk" and getting credit will be easier. You'll also find that higher credit scores usually mean better loan terms.
There is no standard scoring system that lenders must use when approving loans. They each have their own guidelines and cut-offs. But here is a general idea of the different ranges credit scores tend to fall in.
A score of 650 or better usually means getting credit approval will be simple and quick. It shows that you have a very good credit history. As I said earlier, this also means you will probably have very good terms on any loan you get - another reward for handling your past debt responsibly.
Scores between 620 and 650 are considered average. This means your credit is basically good. If you fall into this range, lenders will tend to look for any possible credit risks before approving a high credit limit or large loan amount. You may find you have to provide additional documentation and explanations when applying.
Also, instead of being quick and easy, your loan may take longer to close. But there is a good chance you will still be able to get credit at a good rate.
If your credit score is below 620, this doesn't necessarily mean you won't get credit. But you should realize that the interest rates and terms of your loan will probably be less desirable, due to your low credit rating.
So what is a credit score -- and why is it important?
Your credit score is a number the credit bureaus use to rate just how credit-worthy you are. They look at both your past credit history and how well you are handling any current debt you may have.
Trans Union, Equifax, and Experian are the three major credit bureaus lenders use. Each credit bureau has their own way of calculating your credit score, but they all report their scores using the same scoring method: FICO. FICO is short for Fair Isaac Corporation. Don't be confused if one person uses the term "FICO score" and another uses "credit score" -- they both mean essentially the same thing.
The truth is, lenders won't always ask for credit reports or credit scores from all three credit bureaus when you apply for a loan. Fortunately, since the "big three" all use the same FICO system, a score of 680 from one is thought to be the same as a score of 680 from the other two credit bureaus. Even so, it's a good idea to review your credit report from each one, as sometimes mistakes are made. When that happens, you should contact the credit bureau to have them corrected.
Credit Score Ranges - What Is Considered A "Good" Credit Score?
Credit scores range from a low of 375 to a high of 900. If you have a higher score, you are usually considered a better "risk" and getting credit will be easier. You'll also find that higher credit scores usually mean better loan terms.
There is no standard scoring system that lenders must use when approving loans. They each have their own guidelines and cut-offs. But here is a general idea of the different ranges credit scores tend to fall in.
A score of 650 or better usually means getting credit approval will be simple and quick. It shows that you have a very good credit history. As I said earlier, this also means you will probably have very good terms on any loan you get - another reward for handling your past debt responsibly.
Scores between 620 and 650 are considered average. This means your credit is basically good. If you fall into this range, lenders will tend to look for any possible credit risks before approving a high credit limit or large loan amount. You may find you have to provide additional documentation and explanations when applying.
Also, instead of being quick and easy, your loan may take longer to close. But there is a good chance you will still be able to get credit at a good rate.
If your credit score is below 620, this doesn't necessarily mean you won't get credit. But you should realize that the interest rates and terms of your loan will probably be less desirable, due to your low credit rating.
About the Author:
As you can see, your credit score plays a big part in the type of credit you are able to get. If you find your credit score isn't as high as you need it to be, don't panic. There are things you can do to improve your credit rating starting today! For more articles on personal credit and how it works, visit http://CreditHelp.ImprovingYourFinances.com
posted by Credit Counseling at
7:41 PM
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