How's My Credit? - Tips To Understanding Your Credit Score
If you're thinking about applying for credit, it's always a good idea to find out what your current credit score is ahead of time. It will be one of the first things your lender looks at when reviewing your application. And it could well be a determining factor in how quickly your loan is approved. Knowing what your credit score is before you apply will help eliminate any surprises along the way.
So what is a credit score -- and why is it important?
This is a number that's calculated by the credit bureaus to show how credit-worthy you are. It's based on your past credit history, as well as any current credit accounts 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?
FICO scores range from 375 to 900 points. A higher score is typically considered a better risk. So the higher your credit score is, the easier it will be for you to get credit and the better the terms will be.
While each lender has his own criteria to follow, here is a general guide that shows how credit scores tend to rank.
If your credit score is 650 and above, this usually indicates very good credit history. This means you will probably find getting credit approval is quick and easy. Another bonus for having very good credit is that the terms of your loan will likely be very good, too.
"Average" credit tends to fall somewhere between 620 and 650. This is considered basically good, but you may find lenders need a little more documentation or explanation before they approve your loan. They tend to be a bit more careful, looking for any possible credit risks before they approve a large loan or high credit limit.
You may also find that your loan will take longer to finalize. Even so, chances are good that you are able to get approval at a good credit rate.
Don't panic if your credit falls below 620. It doesn't mean you will never get credit. The right lender may still be willing to give you a loan, but you need to accept that your interest rate will likely by higher and terms won't be as good.
So what is a credit score -- and why is it important?
This is a number that's calculated by the credit bureaus to show how credit-worthy you are. It's based on your past credit history, as well as any current credit accounts 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?
FICO scores range from 375 to 900 points. A higher score is typically considered a better risk. So the higher your credit score is, the easier it will be for you to get credit and the better the terms will be.
While each lender has his own criteria to follow, here is a general guide that shows how credit scores tend to rank.
If your credit score is 650 and above, this usually indicates very good credit history. This means you will probably find getting credit approval is quick and easy. Another bonus for having very good credit is that the terms of your loan will likely be very good, too.
"Average" credit tends to fall somewhere between 620 and 650. This is considered basically good, but you may find lenders need a little more documentation or explanation before they approve your loan. They tend to be a bit more careful, looking for any possible credit risks before they approve a large loan or high credit limit.
You may also find that your loan will take longer to finalize. Even so, chances are good that you are able to get approval at a good credit rate.
Don't panic if your credit falls below 620. It doesn't mean you will never get credit. The right lender may still be willing to give you a loan, but you need to accept that your interest rate will likely by higher and terms won't be as good.
About the Author:
If you find your credit score isn't as high as you'd hoped, don't despair. 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
3:45 PM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home