Explain Credit Scores

Explaining Your Credit Score

Most of us know that our credit is rated, and that credit rating will determine what sort of interest rates we pay for car loans, home mortgages, and credit card balances. Of course, a credit score will determine our ability even get credit at all! But beyond that, many consumers really do not understand what a credit score means. The thing is, the key to improving your credit score, is understanding it, and that is why we want to explain your credit score.  

Sometimes a credit score is called a FICO score, and this is an acronym for Fair Isaac COrporation. Fair Isaac developed the basic calculations that go into coming up with a score. Note that the three major credit bureaus that collect information and produce credit reports and scores all use a slightly different calculation. It is very likely that your own credit score will be a bit different when reported by Experian, Transunion, or Equifax.

A credit score can range from 300 to 850. In general, a score over 700 is considered good credit. A score less than 600 would be considered poor. Within that 600ish average range, there is considerable variation. In general, a score in the high 600s would be considered average, and a score in the lower 600s would be considered “fair”.

You can obtain a free credit report  from several sources, and you can obtain all 3 of your credit repots and scores for a fee over the internet. It really is important to review yours for several reasons. First, you need to know how your credit looks so you know what to expect when you apply for a loan. And of course, many people find that their credit reports are not accurate, and you do have the right to dispute the information.