A credit score is a three-digit number that estimates your creditworthiness.
According to the Consumer Financial Protection Bureau (CFPB), credit scores are essentially based on information from your credit reports. The data gathered from your credit reports are done by the credit bureaus. The largest bureaus are Experian, Equifax and Transunion.
The scores the bureaus use are calculated by companies such as VantageScore and FICO by using complex formulas called, scoring models.
Although different lenders have different standards, a good FICO score is generally 670 or higher. For VantageScore 3.0, a good score is 661 or above.
Credit scores range from 300 to 850. To some, these may seem just like numbers, but these numbers are really important. Having a good credit score is key to a successful financial future. The credit score range depends on the credit scoring model being used by whichever creditor you're applying for credit from.
Even though creditors use their own scoring model for what scores they see as acceptable, these are general scoring guidelines:
Scores of 720 or higher are generally considered excellent credit.
Scores between 690 and 719 are considered good credit.
Scores between 630 and 689 are fair credit.
A score of 629 or below is or credit
Anytime you apply for a loan, or credit, the lender will review your credit report to determine your eligibility. Sometimes this will yield a hard, or soft, inquiry. Too many hard inquires will damage your score. Listed below are a few factors that contribute to your credit scores:
Payment history
Unpaid debt(s)
Credit utilization
Loan types (revolving / installment)
Credit history
Hard credit inquiries
Payment history makes up 35% of your credit score. Roughly 30% contributes to unpaid debts. The remaining primary factors contribute to loan types (10%), credit history (15%) and hard credit, or new credit (10%).
Having a good credit score comes down to using credit responsibly over time. And the same rules apply when it comes to maintaining your credit score.
Be confident knowing there are several ways to build credit and learn good building credit habits when you’re just starting out!
Check your FICO Score here for $1 with no impact with your credit score.
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