What Do The Credit Score Numbers Mean?
A credit score is a numerical representation that's obtained
by using a formula to rate your credit report. Computer programs
take your credit report, analyze certain factors, and then assign
a number to you that is suppose to tell creditors of the likelihood
that a you will repay a loan or credit card on time. The higher
the credit score, the better risk you are believed to be. Your
credit score changes any time information changes in your credit
report and if you have a short or incomplete credit history, it
may not be possible to calculate a credit score at all.
A credit score generally ranges from the 300s to the 800s. The
following is a break down of what your credit score may mean but
remember than these credit score results are often interpreted
differently by different lenders.
| Credit Score |
Interpretation |
| Above 730 |
Excellent Credit |
| 700 - 729 |
Good Credit |
| 670 - 699 |
Creditors Will Want To
Take A Closer Look at Your File But Overall You Project An
Average Risk. |
| 585 - 669 |
You Are A Higher Risk.
This Means You Will Not Be Eligible For The Best Rates. |
| Below 584 |
Poor Credit Risk. Unless
You Have Something Else To Offer Creditors - Like Good Collateral
- You Will Likely Be Turned Down For Most Credit/Loans. |
What Impacts My Credit Score?
The system for calculating credit scores
is not public knowledge however we do have some idea of what impacts
the scores. There are five main areas that are likely figured
into the credit scoring process
Payments
Late payments, delinquencies, bankruptcies
- anything that indicates a past failure to pay on time will
hurt your credit score. The more recent these problems occur,
the more weighted they will be when figuring your credit score.
Current Debt
The more debt you have, the greater the
chance is that you will not be able to keep up with more payments.
This means that current debt is also rated heavily into your
score.
Credit Inquiries
Frequent credit checks by companies often
indicate that you may be in the process of increasing your debt.
This does not include self-requested credit checks. Those cannot
be held against you.
Credit Lines Available
The more credit line you have available
to you the more lenders will think that you are a risk. This
is because you can easily increase your outstanding debt - causing
you not to be able to meet all of your payments.
Length of Credit History
Creditors are not allowed to look at age
when determining credit-worthiness, however if you credit history
is too short - they won't be able to give you a good score as
you don't have a track record for them to rate.
What Can I Do To Improve My Credit Score?
Generally, you can improve your credit score
by following the tips listed below:
- Check that your credit report information is accurate.
- Pay your bills on time.
- Limit your credit card accounts to limits that you really
need.
- Cancel credit cards that you no longer use. Even zero balances
can count against you.
- Keep balances on credit cards low and pay them off as soon
as you can.
- Be careful when you apply for credit. The more your credit
report is pulled by companies, the worse it looks for you.
