Understanding Your Credit Score - What Those Numbers Really Mean
When you apply for credit, one of the first things a lender will check is your credit score. If you know what your credit score is before you apply, you'll have a better idea of what to expect in the loan process.
In case you don't already know what a credit score is, let me explain...
A credit score is simply a number calculated by the three major credit bureaus that indicates how well you handle credit. This is done by reviewing your past credit history and looking at how you are doing with any current debts as well.
Trans Union, Equifax, and Experian are the three major credit bureaus lenders use. Each credit bureau has their own way of calculating your credit score, but they all report their scores using the same scoring method: FICO. FICO is short for Fair Isaac Corporation. Don't be confused if one person uses the term "FICO score" and another uses "credit score" -- they both mean essentially the same thing.
Don't be surprised if your lender just gets a credit score from one credit bureau, instead of all three. This is not uncommon. Since all three bureaus follow the same scoring system, they will likely be giving very similar scores. For example, if Experian gives you a score of 710, Equifax and Trans Union scores should be in the same range. Of course, sometimes one credit bureau may have bad info. Mistakes happen, which is why you should review your credit report annually with all 3 credit bureaus. If there is a mistake, take the appropriate steps to fix it as soon as possible.
Credit Score Ranges - What Is Considered A "Good" Credit Score?
Credit scores range from a low of 375 to a high of 900. If you have a higher score, you are usually considered a better "risk" and getting credit will be easier. You'll also find that higher credit scores usually mean better loan terms.
There is no standard scoring system that lenders must use when approving loans. They each have their own guidelines and cut-offs. But here is a general idea of the different ranges credit scores tend to fall in.
A score of 650 or better usually means getting credit approval will be simple and quick. It shows that you have a very good credit history. As I said earlier, this also means you will probably have very good terms on any loan you get - another reward for handling your past debt responsibly.
If your score is between 620 and 650, you are considered to have generally good credit. That said, your lender may ask for additional documentation or explanations before approving large loans or extending a high credit limit. They are simply doing their due diligence, looking for any possible credit risks before final approval.
Chances are good that you will be able to get credit at a good rate and decent terms. It's just that instead of quick and easy, it can take a little longer to get approval.
If your credit score is below 620, this doesn't necessarily mean you won't get credit. But you should realize that the interest rates and terms of your loan will probably be less desirable, due to your low credit rating.
In case you don't already know what a credit score is, let me explain...
A credit score is simply a number calculated by the three major credit bureaus that indicates how well you handle credit. This is done by reviewing your past credit history and looking at how you are doing with any current debts as well.
Trans Union, Equifax, and Experian are the three major credit bureaus lenders use. Each credit bureau has their own way of calculating your credit score, but they all report their scores using the same scoring method: FICO. FICO is short for Fair Isaac Corporation. Don't be confused if one person uses the term "FICO score" and another uses "credit score" -- they both mean essentially the same thing.
Don't be surprised if your lender just gets a credit score from one credit bureau, instead of all three. This is not uncommon. Since all three bureaus follow the same scoring system, they will likely be giving very similar scores. For example, if Experian gives you a score of 710, Equifax and Trans Union scores should be in the same range. Of course, sometimes one credit bureau may have bad info. Mistakes happen, which is why you should review your credit report annually with all 3 credit bureaus. If there is a mistake, take the appropriate steps to fix it as soon as possible.
Credit Score Ranges - What Is Considered A "Good" Credit Score?
Credit scores range from a low of 375 to a high of 900. If you have a higher score, you are usually considered a better "risk" and getting credit will be easier. You'll also find that higher credit scores usually mean better loan terms.
There is no standard scoring system that lenders must use when approving loans. They each have their own guidelines and cut-offs. But here is a general idea of the different ranges credit scores tend to fall in.
A score of 650 or better usually means getting credit approval will be simple and quick. It shows that you have a very good credit history. As I said earlier, this also means you will probably have very good terms on any loan you get - another reward for handling your past debt responsibly.
If your score is between 620 and 650, you are considered to have generally good credit. That said, your lender may ask for additional documentation or explanations before approving large loans or extending a high credit limit. They are simply doing their due diligence, looking for any possible credit risks before final approval.
Chances are good that you will be able to get credit at a good rate and decent terms. It's just that instead of quick and easy, it can take a little longer to get approval.
If your credit score is below 620, this doesn't necessarily mean you won't get credit. But you should realize that the interest rates and terms of your loan will probably be less desirable, due to your low credit rating.
About the Author:
It's easy to see that your credit score plays a big part in the type of credit you are able to get. If your credit is less than perfect, don't despair. Find out what you can do to improve your credit rating starting today! For more information, visit http://CreditHelp.ImprovingYourFinances.com
posted by Debt Consolidation Loan at
2:03 PM
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