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What is a credit Score and What are the Credit Score Variables?
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What Is a Credit Score and What are the Credit Score Ranges?
Credit scores assess your probability of repaying new debt. Scores above 690 are generally considered to be good credit.
by Amanda Barroso Lead Writer | Credit scoring, budgeting, personal financial planning Amanda Barroso is a personal financial author she joined NerdWallet in 2021, covering credit scoring. She also wrote data-driven studies and has was a contributor to the NerdWallet's "Smart Money" podcast. Prior to joining the team Amanda was a journalist for over a decade covering issues facing the majority of Americans, which includes her role as a journalist in the Pew Research Center, 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 daily newspapers, MSN Money and Credit.com. Her work has been featured 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
Editor: Kathy Hinson Lead Assigning Editor Personal finances, credit scoring financial management and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. Prior to joining NerdWallet, she worked for 18 years with The Oregonian in Portland in roles including copy desk chief and team leader for design and editing. Prior experience includes copy editing and news for a variety of Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in mass communication and journalism from The University of Iowa.
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Credit scores influence the way you live your life. For instance, whether you're approved for a loan or credit card, what interest rate you pay or whether you are able to get an apartment you want.
An improved credit score can provide you with access to many credit options as well as at lower rates of interest. Creditors with scores of 700 or more often have many options, including the possibility of obtaining zero-interest financing on automobiles and credit cards with no-interest introductory rates.
It pays to know the process of credit score and what the credit score ranges are.
What is credit score?
The credit score can be described as a 3-digit number, typically on a scale of 300 to 850, that estimates how likely you are to repay borrowed money and pay off bills.
The credit scores you get are calculated from information about your credit accounts. This information is gathered by credit reporting agencies, often called , and compiled in your credit records. The three biggest bureaus include Equifax, Experian and TransUnion.
There's no single credit score. Instead, you have several, and they may vary slightly. It's because two big companies calculate scores; more on that below.
The highest credit score you can achieve is 850, but there's no difference between the "perfect" score and an outstanding score in the rates and products you're eligible for. Also, don't worry about trying to get an 850 score, in particular since scores fluctuate regularly.
Know how your credit is evaluated
Find your score free of charge and the variables that affect it, plus suggestions on how to continue building.
What is the difference of FICO scores and VantageScore?
Two companies dominate credit scoring. It is the most well recognized score. Its primary competitor is . They both generally use the credit score range from 300 to 850.
Each company has several different versions of its scoring model, too. The scoring models used typically include VantageScore 3.0 as well as FICO 8.
FICO and VantageScore pull from the same data, weighting the data in a slightly different way. They usually move in tandem: If you have an excellent VantageScore, then your FICO is probably also high.
What is the reason the differences between my FICO score as well as my VantageScore different?
A score is a snapshot and it can change depending on the time you review it. Your score may differ based on which credit bureau supplied the data from your credit report to generate it, or even when the bureau provided the data. Some credit companies do not send transactions to the three bureaus, and so the credit reports from every one is unique.
What is the credit score ranges?
Creditors set their own standards for what scores they'll accept, but these are general guidelines:
A score of 720 or more is generally considered
A score of 690 to 719 can be considered .
Scores ranging from 630 to 689 are .
Scores of 629 or below are
In addition to the credit rating, other factors like your income and other debts may influence creditors making decisions on whether or not to approve your application.
Did you have any idea...
The score in the United States varies a bit between the two main scoring models. The median FICO 8 score stood at 716 at the time of August 2022. This was similar to the score a year before. (0) FICO Choices Blog . . Accessed on Aug 30, 2022.
Its VantageScore 3.0 Average was 695 at the second quarter of 2021.
What are the factors that affect the credit score of yours?
The two primary scores for credit, FICO and VantageScore, take into account the same factors but weight them in a different way.
For both scoring models, the two aspects which matter the most are:
Making payments on time. A misstep here can cost you dearly. Any time you're thirty days or longer past the due date stays on your credit report for many years.
How much you are owed. Credit utilization is the amount of your credit limits are using. It's good to use less than 30 percent of your credit limits -- less is better. You can take several steps to
The weighting is less on these variables however, 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 are rewarded for the ability to have more than one type of credit, such as an ordinary loan and a , as an example.
How recently you have applied for credit: When you make an application for credit, you could see an unintentional dip in your score.
Factors that don't affect your credit score
There are some aspects which are not considered in credit score calculations These are mostly to do with demographics.
For example the race, ethnicity, sex, marital status or age aren't considered in the calculation. Neither is your employment record -- which may include things such as your salary, title or employer -or the location you reside in.
How to improve your credit
What does your credit score measure? In one word: creditworthiness. But what does this actually mean? Credit scores are an attempt to predict your financial behaviors. This is why the factors that go into your score can also provide solid ways to build up your score:
Be sure to pay your bills on time.
Limit credit card balances to 30percent of the limit and, in the ideal case, much less.
Keep old credit cards in your account to safeguard the average age of your accounts. You should also consider using a mixture of credit cards and installment loans.
It is better to spread out credit application forms instead of applying for many in a short period of time. Typically, lenders will initiate an "hard pull" on your credit when you make an application, which will temporarily affect your credit score. Too many applications too close to each other can result in more severe harm.
There are several methods to use when you're getting started and strategies to follow when you've got it established. Doing things like making payments towards your account balances a few times throughout the month and requesting higher credit limits can boost your score.
How can I check and monitor my creditscore?
You can check your own credit report -- it's a thingyou can determine what the lender is likely to look at.
It is possible to obtain one credit score from a personal finance site such as NerdWallet, which offers a TransUnion VantageScore 3.0. Some personal banking apps offer free credit scores, so you can make the habit of checking your score when you log in to pay bills.
It's important to use the same score each time you test. If you don't, it's like trying to monitor your weight on various scales or even changing between kilograms and pounds. Therefore, choose a score and get an exercise plan to track your credit. Any changes that are made by one score may be evident in the other.
Be aware that, just like the weight of your body, scores change. So long as you maintain an acceptable range, these variations won't have an impact on your financial well-being.
You can help protect your credit score by communicating with each credit bureau. You can still use credit cards, however nobody can apply for credit using your personal data since access is restricted when your credit is frozen. The process of freezing your credit is completely free and takes just a few minutes, but it is a significant step to safeguard your financial security.
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The authors' bios: Amanda Barroso covers consumer credit and debt for NerdWallet. She previously worked at the Pew Research Center and earned a doctorate at The Ohio State University.
Bev O'Shea is a former credit writer for NerdWallet. Her work was published in publications such as the New York Times, Washington Post, MarketWatch and elsewhere.
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