What Your Credit Score Means

What a Credit Score is

A credit score is issued by the credit reporting agency or by the lender.  This number that is assigned to your credit is a scoring system that adds up the points of your good credit and subtracts the negative items that are found on your credit report. The end number is your credit score. This is the number that is helpful to lenders to judge your creditworthiness.  A high score means you are a very low risk and a good person to lend money to.  A low score means that you are a very high risk and they are not going to want to lend money to you.


Credit Score of 760 or Higher

Excellent Credit – Lenders will love lending money to you.  If your income is high enough to afford the loan and you have little to no debt then you should be able to qualify for low interest rates and get the loan you want.


Credit Score of 700 – 759

Good Credit – You might not be able to get the lowest interest rates that are offered, but you should be able to qualify for very good interest rates, loans and credit.


Credit Score of 621 – 699

Fair Credit – Obtaining a loan or credit card will be difficult and you can expect to pay high interest rates when you do manage to get credit offered to you.


Credit Score of 620 and Lower

Poor Credit – You will have a very difficult time obtaining any credit.  When you do, you will have to offer collateral.


How Your Credit Score is Figured


Payment History

Timeliness of your payments means everything to your credit score. If you always pay every payment on time, most of the credit battle is won.


Outstanding Credit

If you have too many debts, even when you pay them on time, it can have a negative impact on your overall credit score. It is important to have very few loans and very few credit cards with balances.


High Balances

If you have high outstanding balances on your loans and credit cards, it can also have a negative impact on your credit score.  This is the case even when you pay everything on time.


Length of History

Lenders want to see that you have had credit for many years and have been actively paying on debts.


Credit Requests

Applying for credit often will hurt your credit score. It is important to rarely apply for credit.


Variety of Credit

It helps your credit score to have a nice variety of types of loans and credit obligations.  For instance, it is good to have had a couple of credit cards, a mortgage and a car loan.


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