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Your credit score is a three-digit numerical representation of your credit report that falls between 300 and 850.
It is calculated by credit bureaus that include the “big three”: Equifax, Experian and TransUnion. Each credit-scoring bureau uses different criteria for measuring your credit score, weighing your history against a proprietary algorithm.
In 2014, the Consumer Financial Protection Bureau pushed for top credit card companies to show consumers their credit score free of charge. Since then, many of the main credit card issuers have obliged, letting customers see their score either on a monthly statement or online.
While many of the lenders only allows its customers to view their credit score, Discover and Capital One allows everyone — customer or not — to access their credit score.
Lenders and credit providers use both your credit score and the information in your credit report to make decisions about whether you’re a reliable borrower for credit cards, personal loans, a mortgage or auto loans — plus the rates you’ll receive. On top of that, it can also determine how much you’ll pay for car insurance and rent.
Knowing your credit score can tell you where you fall in the credit range, from poor to excellent credit, and how your overall financial health is viewed by potential lenders.
You have a few different types of credit scores and each one is calculated differently depending on the credit reporting agency. In general, each of the factors below are what credit bureaus use to calculate your overall credit score.
Avoid these five common credit mistakes that could potentially impact and drag your score down:
Today, FICO Scores are used in 90% of credit decisions, which makes it a good barometer of how potential lenders might see you when determining approval.
|Rating||FICO score range|
|Poor||579 and below|
Scoring systems will vary depending on where you’re getting your score from. However, they’re all similar in that the higher the credit score, the better your chances are at being approved for a loan.
Lenders and even the bureaus weigh the information in your credit history differently, but they’ve widely adopted two scores: FICO Score and VantageScore.
Both weigh the same factors when determining your credit score, including how long you’ve had credit, your payment history, your credit utilization rate and how many loan and other types of credit you carry.
Here’s a list of credit score ranges for the scoring models you may come across.
Each credit-scoring model (FICO and VantageScore being the most widely used) has different criteria for measuring scores. Here’s how applicants with different scores are viewed by credit issuers.
|Credit rating||How a lender sees your credit score||FICO Score||VantageScore|
|Very good||You’re more likely than the average American to maintain healthy credit, and it’s unlikely you’ll incur an adverse event in the next 12 months.||740+||720+|
|Good||You’re less likely to declare bankruptcy, miss a payment on a debt or have a judgment against you, indicating less likelihood of a default.||670–739||658–719|
|Fair||You’re likely to incur an adverse event such as a default, bankruptcy or something similar in the next year.||580–669||601–657|
|Poor||You’re highly likely have adverse events listed on your credit report within the coming year, including court judgments, bankruptcies, insolvency or defaults.||579 or lower||600 or lower|
Your credit score calculates your level of risk as a borrower based on your past behavior. It’s not a guarantee that an adverse event won’t occur but simply an indication that Equifax considers it unlikely.
Here are just a few ways to increase your credit score:
Your credit report is a detailed record of your borrowing history, while your credit score is a numerical representation of your creditworthiness based off of your credit report.
On your credit report is list of the applications you’ve made for different forms of credit (whether they’ve been approved or not); your repayment history; details of any defaults you may have; and information about the consumer and commercial accounts you hold.
It also contains personal information including your name and age as well as data held on public record, such as bankruptcies. Your credit score is calculated by credit bureaus using the information on your credit file. The higher your credit score, the lower your risk as a borrower.
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