Understanding Your Credit Score - What Those Numbers Really Mean
If you're thinking about applying for credit, it's always a good idea to find out what your current credit score is ahead of time. It will be one of the first things your lender looks at when reviewing your application. And it could well be a determining factor in how quickly your loan is approved. Knowing what your credit score is before you apply will help eliminate any surprises along the way.
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.
The three major credit bureaus are Experian, Equifax, and Trans Union. Each one has it's own method of deciding what your credit score is. Then they use a scoring system to show how good you are at handling credit and paying your bills on time. They all use the same scoring system - FICO - which is an acronym for Fair Isaac Corporation. That's why many people will use the terms "credit score" and "FICO score" interchangeably.
The truth is, lenders won't always ask for credit reports or credit scores from all three credit bureaus when you apply for a loan. Fortunately, since the "big three" all use the same FICO system, a score of 680 from one is thought to be the same as a score of 680 from the other two credit bureaus. Even so, it's a good idea to review your credit report from each one, as sometimes mistakes are made. When that happens, you should contact the credit bureau to have them corrected.
What Is A "Good" Credit Score?
FICO scores range from 375 to 900 points. A higher score is typically considered a better risk. So the higher your credit score is, the easier it will be for you to get credit and the better the terms will be.
While each lender has his own criteria to follow, here is a general guide that shows how credit scores tend to rank.
If your credit score is 650 and above, this usually indicates very good credit history. This means you will probably find getting credit approval is quick and easy. Another bonus for having very good credit is that the terms of your loan will likely be very good, too.
"Average" credit tends to fall somewhere between 620 and 650. This is considered basically good, but you may find lenders need a little more documentation or explanation before they approve your loan. They tend to be a bit more careful, looking for any possible credit risks before they approve a large loan or high credit limit.
You may also find that your loan will take longer to finalize. Even so, chances are good that you are able to get approval at a good credit rate.
A score below 620 doesn't automatically mean you won't get credit. But you may need to shop around a bit to find the right lender. You should also understand that the interest rates and terms of your loans won't be as desirable.
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.
The three major credit bureaus are Experian, Equifax, and Trans Union. Each one has it's own method of deciding what your credit score is. Then they use a scoring system to show how good you are at handling credit and paying your bills on time. They all use the same scoring system - FICO - which is an acronym for Fair Isaac Corporation. That's why many people will use the terms "credit score" and "FICO score" interchangeably.
The truth is, lenders won't always ask for credit reports or credit scores from all three credit bureaus when you apply for a loan. Fortunately, since the "big three" all use the same FICO system, a score of 680 from one is thought to be the same as a score of 680 from the other two credit bureaus. Even so, it's a good idea to review your credit report from each one, as sometimes mistakes are made. When that happens, you should contact the credit bureau to have them corrected.
What Is A "Good" Credit Score?
FICO scores range from 375 to 900 points. A higher score is typically considered a better risk. So the higher your credit score is, the easier it will be for you to get credit and the better the terms will be.
While each lender has his own criteria to follow, here is a general guide that shows how credit scores tend to rank.
If your credit score is 650 and above, this usually indicates very good credit history. This means you will probably find getting credit approval is quick and easy. Another bonus for having very good credit is that the terms of your loan will likely be very good, too.
"Average" credit tends to fall somewhere between 620 and 650. This is considered basically good, but you may find lenders need a little more documentation or explanation before they approve your loan. They tend to be a bit more careful, looking for any possible credit risks before they approve a large loan or high credit limit.
You may also find that your loan will take longer to finalize. Even so, chances are good that you are able to get approval at a good credit rate.
A score below 620 doesn't automatically mean you won't get credit. But you may need to shop around a bit to find the right lender. You should also understand that the interest rates and terms of your loans won't be as desirable.
About the Author:
If you find your credit score isn't as high as you'd hoped, don't despair. There are things you can do to improve your credit rating starting today! For more articles on personal credit and how it works, visit http://CreditHelp.ImprovingYourFinances.com
posted by Debt Consolidation Loan at
2:54 AM
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