Abstracts:
A credit score is a three-digit number designed to represent the likelihood that you will pay your bills on time.
There are many different credit scores and scoring models.
Higher credit scores generally result in more favorable credit terms.
A credit score is a three-digit number, usually between 300 and 850, designed to represent your credit risk, or the likelihood that you will pay your bills on time.
Credit scores are calculated using information from your credit reports, including your payment history, the amount of debt you have and the length of your credit history. Higher scores mean you have demonstrated responsible credit behavior in the past, which can make potential lenders and creditors more confident in evaluating a credit application.
Credit score ranges vary depending on the credit scoring model used, but are generally similar to the following:
300-579: Poor
580-669: Fair
670-739: Good
740-799: Very Good
800-850: Excellent
There are many different scoring models, and some use other data, such as your income, when calculating credit scores. Credit scores are used by potential lenders and creditors, such as banks, credit card companies or car dealers, as a factor in deciding whether to offer you credit, such as a loan or a credit card.
Why are credit scores important?
Why is it important to strive for a higher credit score? Simply put, those with higher credit scores generally receive more favorable credit terms, which can translate into lower payments and less interest paid over the life of the account.
Remember, however, that everyone’s financial and credit situation is different. Different lenders may also have different criteria when it comes to granting credit, which may include information such as your income.
The types of credit scores used by lenders and creditors may vary depending on your industry. For example, if you are buying a car, an auto lender may use a credit score that places more emphasis on your payment history when it comes to auto loans.
Credit scores can vary according to the scoring model used, and they can vary according to the credit bureau providing the credit report used for the data. This is because not all creditors report to all three nationwide credit bureaus: Equifax, Experian and TransUnion. Some may report to only two, one or none at all. In addition, lenders may also use a combined credit score from the three nationwide credit bureaus.
