Find out what your starting credit score is and how you can improve it over time.
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Understanding Your Score
Credit scores are confusing. There are a lot of them out there, and it can be difficult to know which one is the “real” score. And when you’re trying to establish or improve your credit, it can be hard to know where to start. So let’s break it down.
What is a credit score?
A credit score is a numerical expression based on a statistical analysis of a person’s credit files, to represent the creditworthiness of that person. A credit score is primarily based on credit report information typically sourced from credit bureaus.
In the United States, there are three major credit bureaus: Equifax, Experian, and TransUnion. Lenders will typically use information from all three in order to establish an individual’s creditworthiness. A low credit score indicates to lenders that you have not managed your finances well in the past, and as a result they will be more reluctant to lend you money or offer you favorable loan terms.
Credit scores range from 300 (very poor) to 850 (excellent). The vast majority of people fall somewhere in the middle, with a score of 700 or above considered good, and a score of 800 or above considered excellent.
What is a FICO score?
Your FICO score is a numerical representation of your creditworthiness—the higher your score, the better. Generally, a score above 700 is considered good, while anything below 650 is considered poor. Your score is determined by several factors, including your payment history, credit utilization, length of credit history, and more.
Lenders use your FICO score as one way to decide whether to approve you for a loan or credit card and what interest rate to offer you. The higher your score, the lower the interest rate you’ll be offered.
You have three FICO scores—one each from Experian, Equifax, and TransUnion—because lenders don’t necessarily report to all three credit bureaus. (Your “credit report” is a record of all your credit activity.) They’re also not required to use the same scoring model; so one lender may consider your Equifax score of 680 to be excellent, while another may view it as only fair.
Checking your scores regularly helps you keep track of your progress and spot any potential red flags early on. You can view all three scores for free once a year at AnnualCreditReport.com. And many personal finance websites offer free access to your scores as well.
What is a VantageScore?
VantageScore is a credit scoring model developed jointly by the three major national credit bureaus: Experian, Equifax, and TransUnion. Like the FICO score, the VantageScore credit score uses information from your credit report. However, the VantageScore model is constantly evolving to reflect changes in consumer behavior, so it may use different factors than FICO to come up with your score.
The most recent version of the VantageScore model is 3.0, which was released in 2013. This version of the VantageScore credit score uses a slightly different scoring range than previous versions (300-850 instead of 501-990), so your score may be different than what you’re used to seeing.
Generally speaking, a good VantageScore is anything above 700. However, keep in mind that lenders may have their own definition of what’s considered a “good” score, so it’s always best to check with them directly to see what sort of credit scores they’re looking for.
The Minimum Score You Need
When you’re looking to start your credit journey, it’s important to know what the minimum score is that you’ll need in order to take out a loan or open a credit card. The answer may surprise you.
For a good credit score
Your credit score is very important. It is one of the first things a lender will look at when considering you for a loan. The higher your credit score, the more likely you are to be approved for a loan with favorable terms. A low credit score could lead to a higher interest rate and less favorable terms.
There are many factors that contribute to your credit score, but the most important thing you can do is make all of your payments on time. This includes your mortgage, car payments, student loans, credit card bills, etc. Lenders want to see that you have a history of making on-time payments because it indicates that you are likely to repay any money they lend you.
Another factor that contributes to your credit score is the amount of debt you have relative to your income. This is often referred to as your “debt-to-income ratio.” If you have a lot of debt and/or your income is low, this could indicate to lenders that you are at risk of defaulting on a loan. Conversely, if you have little debt and/or a high income, this could indicate that you are a low-risk borrower.
There is no one “magic number” for what constitutes a good credit score, but most experts agree that anything above 700 is excellent and anything below 600 is poor. If your score is below 600, don’t despair – there are still things you can do to improve it. Start by paying all of your bills on time and maintaining a healthy debt-to-income ratio. You can also try using a credit monitoring service like Credit Karma or Experian Boost to help give your score an extra boost.
For a bad credit score
There are two types of bad credit: one is where your credit score is below 580, and the other is where your credit score is 580 or above but you have a recent history of missed payments, bankruptcies or other financial problems. If your score is below 580, it will be very tough to get approved for a loan or credit card. If your score is580 or above, you may still be able to get approved for some loans and credit cards, but you’ll probably have to pay a higher interest rate.
For a bad credit score, the minimum score you need will depend on the lender and the type of loan or credit card you’re applying for. For example, if you’re applying for a mortgage, the minimum score you need will likely be 620. If you’re applying for a car loan, the minimum score you need will likely be 660. And if you’re applying for a credit card, the minimum score you need will likely be 700.
The Maximum Score You Can Get
Most credit scores range from 300 to 850, with the average credit score being around 680. However, it is possible to get a credit score above 850. The maximum credit score is 1,000. A credit score of 1,000 is exceptional and means you have a perfect credit history.
For a good credit score
The maximum score you can get is 850. So if you have a score of 850, congratulations! You have the highest possible credit score.
Your credit score is a number that lenders use to determine how likely you are to repay a loan. The higher your score, the better your chances of getting approved for a loan with a low interest rate. A good credit score is generally considered to be 700 or above.
For a bad credit score
If you have a bad credit score, it means that you have a history of making late payments, skipping payments, or defaulting on loans. This can make it difficult to get approved for a loan, credit card, or mortgage. In some cases, you may be required to put down a larger down payment or pay a higher interest rate.
There are two main types of credit scoring systems in the United States: FICO® and VantageScore. The FICO® Score is the most commonly used credit score, and ranges from 300 to 850. The VantageScore ranges from 501 to 990.
The maximum score you can get on a FICO® Score is 850. The maximum score you can get on a VantageScore is 990.
How to Improve Your Score
A good credit score is important for getting loans, renting an apartment, and even getting a job. A bad credit score can make all of these things more difficult or even impossible. There are a few things you can do to improve your credit score.
For a good credit score
Start by getting a credit report from all three credit bureaus —Experian, Equifax, and TransUnion. Check them carefully for errors. If you find any, file a dispute with the bureau right away.
Your payment history is the biggest factor in your credit score, so make sure you’re always paying your bills on time. Installment loans, like auto loans or mortgages, also help your score. And using a mix of different types of credit — such as credit cards, installment loans and lines of credit — can help you improve it even more.
For a bad credit score
You will have to work extra hard to get approved for new lines of credit with a bad credit score, but it is not impossible. Banks and other lending institutions will be more likely to take a chance on you if you have a solid plan in place to improve your creditworthiness. Here are a few things you can do to start increasing your credit score:
-Pay down your debts: This is the most important thing you can do to improve your credit score. Get rid of as much debt as possible, and make sure you make all of your payments on time from now on.
-Check your credit report for errors: Mistakes on your credit report can drag down your score, so it’s important to check it regularly and dispute any errors you find.
-Limit applications for new credit: Every time you apply for a new line of credit, it shows up as an inquiry on your report. Too many inquiries can lower your score, so only apply for new accounts when absolutely necessary.
-Build up a positive payment history: The longer you have maintained a good payment history, the better off you will be. Try to make all of your payments on time, every time, going forward.