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If you\u2019ve got questions, this overview may have the answers you need. Below, we\u2019ll dig into all you need to know about credit scores and how they work, exploring the most common scoring systems and the factors used to calculate everyone\u2019s unique score.<\/p>\n
Before we dive into the nitty-gritty of a good credit score, it\u2019s important to have a basic understanding<\/a> of what these scores actually are. So, let\u2019s kick things off with a definition.<\/p>\n Simply put, a credit score is a three-digit figure used essentially to rate a person\u2019s \u201ccreditworthiness\u201d \u2013 it is a measurement of how likely a person is to meet their credit obligations. In other words, it is a number that shows how risky it is for lenders to give you money, like loans and credit cards.<\/p>\n There are a few different types of credit scores (more on that below), but the two most common varieties measure between 300 and 850. The higher your score, the better. The higher ratings fall into the \u201cgood\u201d credit score range, which makes it potentially easier for people to get approved for loans, mortgages<\/a>, etc.<\/p>\n It is important for people to have at least a general understanding of how they work, as they\u2019re usually the first thing that lenders look at before deciding if they\u2019re able to offer you certain services.<\/p>\n There are a few different types of credit scores, with FICO\u00ae<\/a> (Fair Isaac Corp) and VantageScore<\/a>\u00ae<\/a> being the two most common scoring models. They are fairly similar, being that they both use the same range, for example, with scores between 300 and 850. So, if you have a good FICO\u00ae score, you may have a good credit score with VantageScore<\/a>\u00ae, too.<\/p>\n FICO\u00ae was launched back in 1989<\/a>, and, according to the company itself, it is used by more than 9 in 10 of America\u2019s leading lenders<\/a>. There are multiple types of FICO\u00ae credit scores, like a FICO\u00ae Auto Score and a FICO\u00ae Bankcard Score, which lenders may look at for different sorts of loans or financial services.<\/p>\n What is a good credit score with FICO\u00ae? Anything from 670 up is considered good, very good, or exceptional.<\/p>\n Then, there\u2019s VantageScore\u00ae. It\u2019s not as old as FICO\u00ae, having been released back in 2006. Three leading credit companies \u2013 Equifax\u00ae,, Experian\u00ae,, and TransUnion\u00ae, \u2013 all worked together to create VantageScore\u00ae. It was designed as an alternative to FICO\u00ae, using many of the same principles, but weighing individual factors a little differently to work out each person\u2019s rating. According to VantageScore, approximately 33 million more consumers<\/a> can be scored using its model and most top 10 US banks, large credit unions and leading fin-techs use VantageScore credit scores.<\/p>\n What is a good credit score with VantageScore\u00ae? Anything from 661 upward is classified as either good or excellent.<\/p>\n There are other options out there. There\u2019s the Equifax<\/a>\u00ae,<\/a> credit scoring system<\/a>, for instance, which uses a slightly different range of 280 to 850. Many companies also claim to offer their own custom credit scores, but some simply use either the FICO or VantageScore \u00ae systems to generate them.<\/p>\n So, we know the basics of credit scores, but how are they calculated? Well, that may seem like a mystery, but it\u2019s really not all that complicated once you start to dig into it. Essentially, no matter whether you\u2019re talking about FICO\u00ae or VantageScore\u00ae, credit scores are worked out by taking a range of financial factors into account.<\/p>\n What is it that companies look at to calculate a person\u2019s credit score? Well, their primary source of information is your credit report. That\u2019s a report that shows your credit history, covering the kinds of credit you\u2019ve had in the past and how effective and efficient you\u2019ve been in terms of keeping up with installments and avoiding debts and late payments.<\/p>\n As explained above, FICO\u00ae and VantageScore\u00ae use similar factors but weigh them a little differently.<\/p>\n FICO\u00ae uses the following factors<\/a> and weights:<\/p>\n VantageScore\u00ae, meanwhile, uses the following system<\/a>:<\/p>\n As explained above, every credit score system involves a range of potential scores, typically from 300 up to 850. The higher your score, it is considered the better credit you have, and the easier you may find it when applying for loans and other sorts of credit.<\/p>\n By taking all of the aforementioned factors into account, like credit mix, payment history, and length of credit history, FICO\u00ae and VantageScore\u00ae calculate each person\u2019s score. The scores can be anywhere on the scale from 300 to 850, and the scale is broken down into distinct sections. This is how each determine whether a score is good, poor, or something else.<\/p>\n FICO\u00ae uses the following scale<\/a> and sections:<\/p>\n VantageScore\u00ae uses a slightly different scale<\/a>,<\/p>\n We\u2019ve looked at what is considered a good credit score. But why does it matter in the first place? Why is it so important to know \u201cWhat is a good credit score?\u201d and why are people so strongly encouraged to aspire to good credit score ratings and ranges? Well, there are a few reasons for this.<\/p>\n The main reason why a good credit score is desirable is because it may make things easier, especially those big stages of life where people often need a bit of financial help \u2013 buying a house, buying a car, etc. When you need to apply for loans, mortgages, etc., lenders will look at your score, and if it\u2019s not high enough, you may find it more difficult to get approved.<\/p>\n However, that\u2019s not the only benefit! Having a good credit score can also help in other ways. It might help you receive more beneficial terms on your loans and financial services, for instance, and it may help you save money<\/a> on insurance, too. Some employers even look at your credit rating to get an idea of your reliability, and a good score can make it easier to get certain jobs.<\/p>\n Building up and maintaining a good credit score is essential if you want to enjoy the best financial services, save the most money, and have the easiest access to loans, credit cards, and more. Here are all the main benefits, briefly broken down:<\/p>\n Of course, if you don\u2019t know what your credit score is, it can be tricky to maintain it or build it up. Fortunately, there are ways to keep track of your score.<\/p>\n Checking your credit report on a regular basis is an important habit. It\u2019ll help you see what your current credit status is like, how much credit you\u2019re using, what money you owe, if you\u2019ve missed any payments, and so on. All of this information is valuable when it comes to improving and building up your credit score to get into that good credit score range.<\/p>\nCredit Score Definition and its Significance<\/h3>\n
Different Credit Score Models Explained<\/h3>\n
How Credit Scores Are Calculated<\/h2>\n
What Influences Credit Score Calculations?<\/h3>\n
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Credit Score Range<\/h2>\n
The Credit Score Scale Defined<\/h3>\n
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Why a Good Credit Score Matters<\/h2>\n
Potential Benefits of Building and Maintaining a Good Credit Score<\/h3>\n
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Monitoring Your Credit Score<\/h2>\n
The Importance of Checking your Credit Report Regularly<\/h3>\n
How to Obtain Free Credit Reports<\/h3>\n