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What is a credit Score and what are the Credit Score ranges?
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What is a credit Score and what are the Credit Score Variables?
Credit scores are a measure of your chances of repaying new debt. Scores of 690 or above are generally considered good credit.
Written by Amanda Barroso Lead Writer | Credit scoring, budgeting personal financial planning Amanda Barroso is a personal financial writer she has joined NerdWallet in 2021 and focuses on credit scoring. She has also written data-driven studies and has participated in NerdWallet's "Smart Money" podcast. Before joining the team, Amanda worked for more than 10 years covering issues that concern numerous Americans as well as writing for the Pew Research Center as well as a policy analyst at the National Women's Law Center and a college professor. Amanda obtained a doctorate at The Ohio State University.
and Bev O'Shea personal finance writer | MSN Money, Credit.com, Atlanta Journal-Constitution, Orlando Sentinel Bev O'Shea is a former NerdWallet authority on consumer credit, scams and identity theft. She has a bachelor's level diploma in journalistic studies from Auburn University and a master's in education from Georgia State University. Before joining NerdWallet she worked for newspaper publishers, including daily ones, MSN Money and Credit.com. Her work has appeared in The New York Times, The Washington Post, the Los Angeles Times, MarketWatch, USA Today, MSN Money and elsewhere. Twitter: @BeverlyOShea.
Updated on Mar 28, 2023
Written by Kathy Hinson Lead Assigning Editor Personal finance, credit scoring, debt and money management Kathy Hinson leads the Core Personal Finance team at NerdWallet. Prior to joining NerdWallet, she worked for 18 years at The Oregonian in Portland in positions such as copy desk chief and team editor and designer. Previous experience included news and copy editing for various Southern California newspapers, including the Los Angeles Times. She received a bachelor's degree in mass communication and journalism at the University of Iowa.
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Credit scores impact many aspects of your life: whether you're approved for an loan or credit card the interest rate you pay or whether you are able to find the apartment you've always wanted.
Higher credit scores could give you access to more credit products -- and with lower interest rates. Creditors with scores of 750 or so frequently have a variety of options, such as the possibility of being eligible for 0% financing on cars and for credit cards with zero interest on the initial period.
It is important to understand the process of credit score and what the credit score ranges are.
What is credit score?
Credit scores are a three-digit number, generally on an scale from 300-850. It indicates how likely you are to repay loans and pay off bills.
Credit scores are calculated based on data about your credit account. The information is collected by credit reporting agencies, often known as, and then compiled in your credit records. The three largest companies are Equifax, Experian and TransUnion.
You don't have a single credit score. Instead, you have several, and they may vary slightly. That's because two major firms calculate scores. Read more on that below.
The most credit score you could achieve is 850, but there's no difference between an "perfect" score and a high score in the products and rates you are eligible for. That's why you shouldn't be anxious about achieving an 850 score, in particular because scores can fluctuate frequently.
Be aware of how your credit score is evaluated
Find your score free of charge and the factors that impact it, as well as suggestions on how to build your score.
The difference is what's the main difference of FICO score and VantageScore?
Two companies dominate credit scoring. It is the most well acknowledged score. Its principal competitor is . They both generally utilize a credit score range of 300-850.
Each company has several different versions of its scoring formula, as well. The scoring formulas that are most often are VantageScore 3.0 and FICO 8.
FICO and VantageScore draw from the same database, but weight the information slightly differently. They generally work in tandem When you have a great VantageScore, your FICO is likely to be high as well.
What's the difference between my FICO score and VantageScore different?
The score represents a moment in time and the score can fluctuate depending on the time you review it. Your score may differ based on the credit bureau that supplied the credit report data used to generate it or even the bureau supplied it. Some credit companies do not send account activity to all three bureaus, so the credit reports from every is unique.
What are the credit score ranges?
Creditors establish their own standards for what scores they'll accept However, these are the general guidelines:
If the score is 720 or more is generally considered
A score of 690 to 719 will be considered .
Scores ranging from 630 to 689 are .
and scores of 629 or lower are
Alongside the credit rating, other aspects like your income and other debts could influence creditors making decisions on whether or not to approve your application.
Did you have any idea...
The in the United States varies a bit between the two scoring models. The average FICO 8 score of 716 in August 2022. It was the same as a year prior. (0) FICO The Decision Blog . . Accessed August 30, 2022.
Its VantageScore 3.0 average was 695 at the second quarter of 2021.
What factors impact your credit scores?
The two main model of credit score, FICO and VantageScore, use the same factors but weight them somewhat differently.
In both models of scoring, two things that matter most are:
Paying bills in time. A misstep here can be costly. If you're at least 30 days over the due date is recorded on your credit report for a period of time.
How much you are owed. Credit utilization describes how much of your credit limit you are making use of. It is recommended to limit your use to less than 30 percent of your credit limits and lower is more beneficial. There are a variety of steps to
The weighting is less on these elements, but they're still important to keep an eye on.
The longer you've been in credit and the more advanced the average age of your accounts the better for your score.
Credit mix: Scores reward the ability to have more than one type of credit, such as an ordinary loan as well as a , for example.
When was the last time you applied for credit: If you apply for credit, a may result in a temporary dip in your credit score.
Things that won't impact your credit score
There are a few things that are not included when calculating credit scores, and these mostly have to do with demographic characteristics.
For example the race, ethnicity, sex, marital status, or age don't count as part of the equation. Also, your work record -- which may include things such as your salary and title- nor the place you live.
How to improve your credit
What is your credit score measure? In one word creditworthiness. What does this really mean? The credit score you receive is an attempt to predict your financial behaviors. This is why the factors that go into your score also point out reliable ways you can build up your score:
Pay all bills at the time they are due.
Maintain credit card balances below 30percent of the limits and, in the ideal case, much less.
Keep older credit cards open to ensure the age average of your accounts. Also, take into consideration having a mix of credit cards as well as installment loans.
Space out credit applications instead of applying for many in a short period of time. Typically, lenders will perform a "hard pull" on your credit when you apply, which can temporarily lower your credit score. Too many applications too close to each other could cause further harm.
There are a variety of options to consider when starting out and ways to once it's established. Paying attention towards your account balances a few times during the month or asking for greater credit limits can boost your score.
What can I do to examine and track my credit?
You can check your own credit -- it -is a good idea to be aware of what the lender is likely to see.
You can obtain a score through a personal finance website like NerdWallet that offers TransUnion VantageScore 3.0. A lot of personal banking apps offer credit scores at no cost, so you can make an habit of checking them in when you log in to pay bills.
It's important to use the same score every time you test. In the wrong way, you'll be attempting to track your weight using various scales or possibly switching between pounds and kilograms. Therefore, choose one score and then create an exercise plan to track your credit. The changes measured by one score are likely to be reflected in the others.
Remember that, like weight, scores can fluctuate. So long as you keep it in an appropriate range, those changes won't have a negative impact on your financial wellbeing.
You can safeguard your credit score by communicating with every credit bureau. You are still able to use credit cards, however no one can apply for credit using your personal information because access is restricted by freezing your credit. Freezing your credit is easy and takes just a few minutes, but it goes a long way to safeguard your financial security.
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About the authors: Amanda Barroso covers consumer credit and debt for NerdWallet. She previously worked at the Pew Research Center and earned her doctorate at The Ohio State University.
Bev O'Shea is a former credit writer for NerdWallet. Her work has been published in publications such as the New York Times, Washington Post, MarketWatch and elsewhere.
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