Know Your Credit Score & What it Can Do for You
A credit score is a numerical value assigned to your person, which defines your measured credit risk; the higher the score, the lower the risk. Credit scores are used as benchmarks for lenders, banks and other economic bodies to assess your financial ability and responsibility. Assigned by various agencies and bodies, your credit score can change depending upon who is assessing you; but a good credit score with one body will normally be a good credit score across the board.
How is Credit Score calculated?
Credit score is calculated by looking at fresh and historic data on a number of factors associated with the consumer (you.) The prioritizing characteristic which accounts for 35% of the decision of a credit score is payment history. This can incorporate anything from paying your automobile bills on time to failing to keep up with your mortgage, this looks into public records too for fiscal information and delinquencies. The next 30% of the decision is made upon the amount owed by the consumer. Any outstanding debts such as unpaid loans and credit cards in debit, along with any available but unused credit options; can all have a sizeable impact on credit score.
The remaining 35% of the credit score is made up by the length of your credit history (15%), diversity of credit used (10%) and inquiries and recent credit applications (10%). It is worth mentioning that not all credit scoring agencies release such detailed metrics about how they calculate credit score, the above denominations are widely held acclaims and are confirmed true for some financial bodies.
What is a good Credit Score?
Credit score is a three digit number which varies between the differing agencies responsible for calculating it. The main bodies used by consumers in the United States include Equifax, VantageScore, Experian, FICO and TransUnion. Across these five agencies, the lowest credit score available is 300 and the highest is 900. Incomparable because of the different ranges they use, it’s difficult to define a numeric value to what is a ‘good’ or ‘bad’ credit score across the board. Equifax values run from 300 to 850, whilst Experian runs from 340 to 830 and TransUnion from 400 to 925. The widest margin of credit score sits with FICO from 300 to 850 whilst the shortest range is calculated by VantageScore from 501 through 900.
How do I find out my Credit Score?
All citizens of the United States are entitled to a free credit report every year, but these don’t necessarily give you an indication of your numerical credit score. To find out your credit score, you will have to contact one of the many agencies available online. These can range from entirely free of charge (through special offers or time periods) to considerably expensive. The wide variety of credit score agencies available allow all consumers to find one suited to their needs, whether that’s a quick one-off check to satisfy their curiosity or an ongoing monthly service which will report the consequences of all financial activity over the past 30 days.