How's My Credit? - Tips To Understanding Your Credit Score
If you're thinking about applying for credit, it's always a good idea to find out what your current credit score is ahead of time. It will be one of the first things your lender looks at when reviewing your application. And it could well be a determining factor in how quickly your loan is approved. Knowing what your credit score is before you apply will help eliminate any surprises along the way.
What exactly IS a credit score?
A credit score is simply a number calculated by the three major credit bureaus that indicates how well you handle credit. This is done by reviewing your past credit history and looking at how you are doing with any current debts as well.
Trans Union, Equifax, and Experian are the three major credit bureaus lenders use. Each credit bureau has their own way of calculating your credit score, but they all report their scores using the same scoring method: FICO. FICO is short for Fair Isaac Corporation. Don't be confused if one person uses the term "FICO score" and another uses "credit score" -- they both mean essentially the same thing.
The truth is, lenders won't always ask for credit reports or credit scores from all three credit bureaus when you apply for a loan. Fortunately, since the "big three" all use the same FICO system, a score of 680 from one is thought to be the same as a score of 680 from the other two credit bureaus. Even so, it's a good idea to review your credit report from each one, as sometimes mistakes are made. When that happens, you should contact the credit bureau to have them corrected.
What Is A "Good" Credit Score?
Your credit score can range from 375 to 900 points. The higher the number, the better you are. Getting credit will be easier, and you'll likely get better loan terms as well.
You should understand that each lender will have their own underwriting guidelines and cutoff points they have to follow. But here is a general guideline you can use to see where your credit score falls overall.
If you have a credit score of 650 and above, you probably have a very good credit history. Because you've been responsible in the past, you will probably find the approval process is quick, easy and painless. An added bonus is that your loan terms and interest rate will probably be very good.
"Average" credit tends to fall somewhere between 620 and 650. This is considered basically good, but you may find lenders need a little more documentation or explanation before they approve your loan. They tend to be a bit more careful, looking for any possible credit risks before they approve a large loan or high credit limit.
Also, instead of being quick and easy, your loan may take longer to close. But there is a good chance you will still be able to get credit at a good rate.
Don't panic if your credit falls below 620. It doesn't mean you will never get credit. The right lender may still be willing to give you a loan, but you need to accept that your interest rate will likely by higher and terms won't be as good.
What exactly IS a credit score?
A credit score is simply a number calculated by the three major credit bureaus that indicates how well you handle credit. This is done by reviewing your past credit history and looking at how you are doing with any current debts as well.
Trans Union, Equifax, and Experian are the three major credit bureaus lenders use. Each credit bureau has their own way of calculating your credit score, but they all report their scores using the same scoring method: FICO. FICO is short for Fair Isaac Corporation. Don't be confused if one person uses the term "FICO score" and another uses "credit score" -- they both mean essentially the same thing.
The truth is, lenders won't always ask for credit reports or credit scores from all three credit bureaus when you apply for a loan. Fortunately, since the "big three" all use the same FICO system, a score of 680 from one is thought to be the same as a score of 680 from the other two credit bureaus. Even so, it's a good idea to review your credit report from each one, as sometimes mistakes are made. When that happens, you should contact the credit bureau to have them corrected.
What Is A "Good" Credit Score?
Your credit score can range from 375 to 900 points. The higher the number, the better you are. Getting credit will be easier, and you'll likely get better loan terms as well.
You should understand that each lender will have their own underwriting guidelines and cutoff points they have to follow. But here is a general guideline you can use to see where your credit score falls overall.
If you have a credit score of 650 and above, you probably have a very good credit history. Because you've been responsible in the past, you will probably find the approval process is quick, easy and painless. An added bonus is that your loan terms and interest rate will probably be very good.
"Average" credit tends to fall somewhere between 620 and 650. This is considered basically good, but you may find lenders need a little more documentation or explanation before they approve your loan. They tend to be a bit more careful, looking for any possible credit risks before they approve a large loan or high credit limit.
Also, instead of being quick and easy, your loan may take longer to close. But there is a good chance you will still be able to get credit at a good rate.
Don't panic if your credit falls below 620. It doesn't mean you will never get credit. The right lender may still be willing to give you a loan, but you need to accept that your interest rate will likely by higher and terms won't be as good.
About the Author:
If you find your credit score is less than perfect, don't despair. There are ways you can start to improve your credit rating - starting today! Get more info on personal credit and how it works at http://CreditHelp.ImprovingYourFinances.com/
posted by Credit Counseling at
3:41 PM
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