How is my credit score calculated?
Every one’s credit score is based on the same system. Mathematical models are used to determine how much credit you should be allotted, according to the default figure.
The models consider the types of debt you have and the amount you still owe. From there, the model researches and compares your repayment history with thousands of other consumers to arrive at your current credit score
Your previous payment behavior is one of the most important factors when it comes to determining your credit score. How much you owe, your credit history overall, as well as how many inquiries your credit report has on it. The type of credit you use, and how much credit is available to you are also factored into your credit score model.
What does my credit score mean? What’s it based on?
The higher your credit score is, the better it’s considered to be. Your credit score is based on a 300 to 850 rating system, 300 being the worst, 850 being absolutely perfect credit. (Which I’m not sure is possible, but you can always strive for it.) Most average scores fall within the 600-700 range.
The boundary between a higher cost loan and a standard loan, aka a sub-prime loan, is generally considered to be a score of 620. A higher credit score then 620 allows you to apply and be accepted for additional credit easily, at a lower cost then someone with a lower credit score. So it’s definitely in your best interest to keep your credit score as high as possible, to get the lowest interest rate when applying for credit.
FAQ: How do I check my Free Credit Report?
Your credit report is the basis for your financial standing. No matter how slick or smart you may be, no bank will touch anyone with a low credit score. It's their money, why would they want to take a bigger risk than they need to?
If you don't know where your credit report score is at, now's the time to take a peek. Don't get surprised with a low credit score when you go in to review your report with a potential lender or even an employer, find out for yourself within minutes.
