Understanding The Credit Score

Answer 1

What is a credit score? Why is it important?

A credit score is a number that basically gives a good indication of a person's ability to pay back money. Your credit score is very important. If you do not have a good credit score or an established credit history, you may have difficulty getting approved for a loan or mortgage. Payment history, debt owed, credit history length, types of credit and new credit are the factors that are taken into consideration when calculating a credit score.

What is the credit score rating scale?

Credit score ranges from 300 to 850. A higher score indicates a better credit history. Below is a breakdown of each score category and its meaning:

700-850

A score that falls between 700 and 850 is excellent. People who have a score in this range will not have any problem getting approved for a loan. They will also be offered the best interest rates.

680-700

Scores that range from 680 to 700 are considered good. Those who have a score in this range will most likely be approved for a loan and be offered great interest rates

620-680

A score that falls between 620 and 699 is considered average. Most people in this range will probably not have any trouble getting a loan, but they may not be offered the best interest rates.

580 and below

Any score that is below 580 is considered low or bad. People in this range could possibly still get approved for a loan, but they will have very high interest rates. They may also have to agree to stricter terms.

What are some things that can be done to improve your credit score?

There is no need to fret if your credit score is less than perfect. You can improve it by reducing the amount of debt that you have. Additionally, you also need to make sure that all of your bills are paid on time every month.