What Is Your Credit Score?
Your credit score is a three-digit number that can have a major impact on your financial future. If you decide to take out money for a car, home or any other major purchase, then your credit score will likely be used to determine whether you get approved for it. Your credit score can range from 300 to 850.
Is My Credit Score Classified as Good?
What 300 to 579 Means
A credit score that falls in this range is classified as poor. Your chances of getting approved for any type of funding are low. Even if you do get approved, you will likely have to pay a lot of interest on top of what you are borrowing. It is important to take steps to approve your credit score if it falls within this range.
What 580 to 669 Means
A credit score in this range can be classified as average. You will have an easier time getting approved for funding than someone who has a lower credit score. However, you will still have to pay higher interest rates. That is why it is still a good idea to work on approving your credit score.
What 670 to 739 means
A credit score in this range is considered good. Most Americans have a credit score that is at or above 670. A chance of approval and great interest rates are some of the perks of having a good credit score.
What 740 to 799 Means
A credit score that is in this range is classified as very good. It typically takes years to build a very good credit score.
What 800 to 850 Means
This is an excellent credit score. Twenty percent of people have a credit score in this range. People who have a credit score in this range have consistently made payments on time for many years. They also have a low income-to-debt ratio.
Is My Credit Score And Credit Report the Same Thing?
Credit score and credit report are not the same even though people tend to use them interchangeably. Your credit report comes from Transunion, Experian and Equifax. Your credit report has your financial information such as collections accounts, bills, liens, mortgages and loans. It also has your personal information on it.
Your credit score is a number that is calculated based on the financial information on your credit score. Keep in mind that because the credit reports may have different information, your score can vary by a few points.
What Is Used to Calculate My Credit Score?
Payment History-35 Percent
The top factor that determines how low or high your credit score will be is your payment history. Consistently paying bills on time is definitely one of the best ways to boost your credit score. On the other hand, one missed payment can cause your credit score to drop by several points.
Amount You Owe-30 Percent
The amount you owe and the available credit is used to determine your credit utilization ratio. If you have a low credit utilization ratio, then your score will be higher. This shows that you can responsibly handle credit.
Length of Your Credit History-15 Percent
The longer you have an established credit history, the better your score will be. Keep in mind that closing an account can also reduce your credit age.
Credit Mix-10 Percent
Lenders love to see people who have diverse types of credit. This includes things like credit cards, student loans, mortgages and auto loans. However, it is important to make sure that every account that you have is in good standing.
New Credit-10 Percent
It is important to avoid applying for too many credit accounts in a short amount of time. You will get a hard inquiry, which is when the score takes a hit because the lender reviews your credit.
Why It Is Important to Check Your Credit Report Regularly
Your score is not the only thing that you should be paying attention to when checking your credit report. You should also review all of the accounts. Your credit report can tell you whether you have been a victim of fraud. If you see accounts that are not yours, then it is important to report it right away.
Twenty-five percent of people have inaccurate information on their credit reports. Identity theft can cause you to have a lower credit score.
How Checking Your Credit Affects the Score
Even though your credit score can take a hit if a lender checks it, you can check your own score without getting a hard inquiry. You should check your own credit score before you apply for any type of funding.
How Does Being Married Affect Your Credit Score?
Even though getting married requires you to combine your finances with your spouse’s, it doesn’t directly affect your credit score. There are only two ways that being married can affect your credit score. For example, if you and your spouse decide to take out a debt in both names, then this can impact your credit score. Your credit score can also be impacted if you or your spouse is an authorized user on a credit card.
How Long Does It Take for a Bad Item to Fall Off Your Credit Report?
A bad item typically stays on your credit report for seven years. However, if you file for bankruptcy, then it can stay on your credit report for up to 10 years. Negative items tend to have less of an impact on your credit score as time goes on.
Even though bad items are eventually removed from your credit report, you do not want to wait years for this to happen. You should start taking steps now by paying off debt and disputing inaccurate information.