What’s a Good Credit Score?
Your credit score is a three-digit number that tells lenders how much risk you pose as a borrower.
A higher credit score means you’re more likely to be approved for new credit, including loans and credit cards.
Your credit score is based on information in your credit report from one or more of the big three consumer credit bureaus. It estimates your level of future credit risk, which lenders use to decide whether to lend you money and at what interest rate.
What is a Credit Score?
A credit score is a three-digit number that lenders use to assess your risk level. It lets them determine if you’ll be approved for a loan, the terms of that loan, and how much interest you’ll pay.
Your credit score is based on data in your credit reports, which are maintained by the three major credit bureaus – Experian, Equifax, and TransUnion. A credit score ranges from 300 to 850 and is a numerical rating that measures your likelihood of repaying debt.
Payment history is the main component of a credit score, which details your track record of paying back debts on time. It encompasses your payments on credit cards, retail accounts, installment loans (such as automobile or student loans), finance company accounts, and mortgages.
The length of your credit history is another important factor. A more extended credit history shows that you’ve been responsible with credit, and lenders prefer that borrowers have a good mix of different credit accounts.
What is a FICO Score?
When getting approved for credit cards, loans, and other financial products, your FICO score plays a significant role. It shows lenders how likely you are to repay debt and your interest rate.
Your score is based on five factors: your payment history, amounts owed, length of credit history, new credit, and types of credit used. The key is paying your bills on time, keeping your balances low, and only opening new accounts for targeted purchases.
Generally speaking, a good credit score falls between 670-739, while anything below 580 is considered poor and would negatively impact your ability to get a credit card or loan.
The two most popular credit scoring models are FICO and VantageScore. Each model has weights and uses relative percentages to calculate your credit score.
What is a VantageScore?
A VantageScore is a credit score that can be obtained for free from various websites and lenders. It is similar to FICO scores in that it falls between 300 and 850, with scores above 660 considered ideal.
A credit score uses information from your credit report to determine your financial stability and ability to repay debts. It considers several categories, including payment history, credit utilization, the average age of accounts, the amount owed, and recent credit activity.
Payment history carries the most significant weight in a VantageScore, so making all your payments on time is essential. Also, maintaining a low credit utilization ratio is an excellent way to improve your score.
Recent credit activity — such as applying for new accounts and hard inquiries — is another factor that influences your score. Be sure only to open new accounts when needed, and don’t make multiple hard inquiries in a short period.
Related Article: Whats a Good Credit Score
What is a VantageScore Plus?
A VantageScore Plus is a free credit monitoring tool from the three nationwide credit reporting agencies (Equifax, Experian, and TransUnion). This tool lets you see your VantageScore, including your score, which ranges from 300 to 850.
Your VantageScore is one of the most important things you need to know regarding your financial health. It helps determine whether or not you qualify for a mortgage, auto loan, apartment rental, and more.
Developed by the top three national credit bureaus in 2006, it offers lenders and consumers an easier way to understand and interpret credit scores. It ranged from 300 to 850 and was developed as an alternative to the FICO score, created by the Fair Isaac Corporation in 1989.
The most critical factor in your VantageScore is your payment history. It accounts for 40% of your score, almost double the weight of the following most influential metric. It’s also a good idea to keep your credit utilization under 30% of your total credit limit.
Thank you for Reading this Article: Whats a Good Credit Score