Credit Score
A credit score is a numerical representation of how worthy you are of receiving the credit, loan, or money you are asking a lender to let you borrow. It is an easy way for lenders to figure out how likely you are to pay back the money they lend to you. Banks and credit card agencies deal with thousands of people, all of who are strangers to them. Instead of taking time to get to know you, personally, before deciding if it is a wise idea to give you a loan, they use your credit score to make this determination.
Your credit score is a three-digit number. It might be anywhere between 300 and 850, although some credit scores can be as high as 900. Each credit bureau will calculate your credit score in its own way, based on the information found in your credit report. You want your credit score to be a high number, because the higher the number, the more reliable you are going to appear to the lenders. In their eyes, you are your credit score.
What is a good number to have as your credit score? In general, this is what the lenders think:- 800 to 850 is excellent
- 729 to 799 is very good
- 680 to 719 is still pretty good
- 620 to 679 is okay
- 580 to 619 is below average
- 500 to 579 is bad
- Below 500 is really bad
Your financial life is directly dependant on how good or bad your credit score happens to be. People with good or excellent credit scores will have no problem getting a loan, be it for a car, mortgage, or starting a business. Good credit scores mean that you can get a credit card with lower annual fees, and nicer extras. Landlords and employers are much more willing to accept people who have nice, high, credit scores.
If your credit score is low, you will have problems. Credit card companies may deny your application for a credit card. Or, they might only offer you a card with an annual fee, a high interest rate, or a limited balance. It will be harder to get a loan if your credit score is low, because lenders will think they are taking a big risk by handing you money. Fortunately, you can do things to improve your credit score.