A credit score is a three digit number that ranges from 300 to 850. It is calculated based on information in your credit report, such as your payment history, the amount of debt that you have and length of credit history.
A good credit score is a vital component of your credit profile. It tells lenders about your creditworthiness and allows them to determine your credit risk and if you can repay your debts.
A credit score is computed by credit bureaus based on several factors such as credit history, credit utilization, and credit mix. A good credit score lands between 670 and 739. Scores below that range may have more limited credit options.
The best way to ensure a good score is to make all your payments on time every month. On credit cards and lines of credit, pay off your full your balance whenever you can.
Having good credit can help you reach your financial goals and make getting approved for a loan easier. Higher credit scores provide more opportunities, providing access to higher credit limits at lower interest rates with lower or no annual fees.
Credit scores are used by lenders to make decisions about all types of credit, from mortgages to credit cards to personal loans and auto loans. Both FICO scores and VantageScores are used by banks and credit card issuers for their credit score models.
Keep on top of your score. Numerous credit monitoring services are available offering free credit reports.
Credit scores between 580 to 669 are considered fair, and any score below 580 is typically considered bad.
Bad credit can be the result of various factors, such as late or missed payments. To avoid a bad credit score, always make your monthly payments on time and, whenever possible, pay off the full balance.
Unauthorized transactions, like identity theft or card theft, can wreck your score and leave you with bad credit. Some lenders only report to one credit bureau or do not report at all, which can also result in a score lower than you might deserve.
There are five factors that affect your credit score: payment history, credit utilization, credit history, credit mix and new credit.
Here's how each factor determines your score:
Factors that affect your credit score.
Having no credit score is not the same as having bad credit. No credit is the result of no recent activity. You could be new to using credit and haven't had time to build up a score yet, or you could have used credit before but not so recently, so there isn't enough recent information to generate a score.
FICO and Vantage are both credit bureaus, two competitors with similar credit scoring models. Both have credit score ranges from 300 to 850.
A good FICO credit score is between 670 to 739. According to the company, its fair scores are between 580 and 669, and an exceptional FICO score is anything above 800.
On the other hand, a good VantageScore lies between 660 and 780, which the company refers to as a "prime credit tier." Scores below 600 are "subprime," while those in the range of 601 and 660 are "near prime." Any score above 780 is referred to as "super prime."
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With a postgraduate degree in commerce from The University of Sydney, Pranay has his finger on the pulse of the finance industry. Breaking down complex financial concepts is his forte.