Your credit score sets the groundwork for your financial life.
It’s the bedrock that all of your financial products rest upon.
Read more:The best credit monitoring services
What is a credit score?
Your credit score is a three-digit number thats calculated based on information in your credit report.
A bad credit score could mean either being denied a loan or facing a higher interest rate.
An excellent score means you pay less in interest since youve proven youre responsible with credit.
Whats a good credit score?
There are two primary credit scoring models: FICO, which stands for Fair Isaac Corporation, and VantageScore.
Both have scores ranging from 300 to 850.
Here’s how they break down.
Why are credit scores important?
Any timeyou want to get a credit cardor apply for a loan, expecta hard credit check.
How are credit scores used?
Anytime you want to borrow money, lenders will check your credit score.
Some people might also consider your credit score as an informal metric for how trustworthy or responsible you are.
How are credit scores calculated?
Your credit report covers everything from payment history to different types of credit use.
This tells lenders you have a lot of outstanding debt and may not be able to repay it all.
Length of credit history, 15%:This is how long youve had credit in your name.
Its not just open accounts; closed accounts are calculated as well.
VantageScores scoring model includes all these factors, but theyre weighted differently and may have slightly different names.
How do I increase my credit score?
If you have a lower credit score, it may not be for the same reason as someone else.
If youre behind on payments:One late payment can cause your credit score to drop.
Late payments or loan defaults will make your score plummet.
Start making minimum payments by the due date every month and watch your score slowly creep up.
If youre in good standing with your credit card issuers, you canrequest a credit increase.
If granted, a credit line increase will lower your overall utilization if your balances owed stay the same.
attempt to limit how many new lines of credit you open each year.
Every time you apply for credit, your credit score gets dinged with a hard credit inquiry.
Too many credit inquiries can make your credit score drop.
How do I find out what my credit score is?
If your credit score isnt where youd like it to be, consider using asecured credit cardto increase it.
Once your score is looking better, you could qualify for some ofthe best credit cardsavailable.
FAQs
FICO scores are used the most by lenders, but VantageScore is a close second.
The highest credit score for both FICO and VantageScore is 850.
