Understanding Your Credit Score and Its Impacts

All consumers strive to maintain a good credit score and reputation. Of course, the higher your credit score, the better. It is key when a person needs to borrow money in the form of a loan so that they can make a considerably large purchase like a vehicle or a home. When your credit score is at the high end, it increases your chances of securing a loan with low interest rates as well as being approved for credit cards with the best rates. However, it can be a challenge to know what constitutes a good, great or excellent credit score because it varies depending on the credit reporting agency. Each agency can have a different set of requirements that make a credit score good, great or excellent. As a result of these confusing details, the consumer may have difficulty in knowing exactly what to do so that they can maintain the best ratings.

Credit Score Ranges

Most often, a typical credit score can fall into the range of anywhere from 300 to 850, with 300 being bad credit to 850 being excellent. Both FICO scores and VantageScore fall under this categorization, which was created by the three major credit bureaus of Equifax, Experian and TransUnion. It’s important to know what the majority of credit ratings mean in terms of score. Here is a rule of thumb to follow:

• 599 and lower is bad credit
• 600 to 649 is poor credit
• 650 to 699 is fair credit
• 700 to 749 is good credit
• 750 and higher is excellent credit

Of course, no matter what the range of your credit score, there are several aspects that come into play to determine whether you can qualify for the best interest rates.

Credit Score Range by Credit Reporting Agency

Lenders will take a look at your credit score from more than one credit reporting agency to determine whether you are a good potential borrower and what interest rate you can get if you qualify. The following are the scoring principles used by the credit reporting agencies:

• FICO credit scores range from 300 to 850
• VantageScore version 3.0 scores range from 300 to 850
• VantageScore versions 1.0 and 2.0 range from 501 to 990
• Equifax credit scores range from 280 to 850
• Experian PLUS credit scores range from 330 to 830
• TransUnion New Account 2.0 credit scores range from 300 to 850

It’s important for consumers to become acclimated with the credit scores being used by the lender of their choice because it can affect their chances of getting a loan. For instance, just because you have a high score with Equifax doesn’t mean that same score would be considered good on VantageScore 1.0. Generally, most consumers who have a credit score range of at least 800 will be the most desired borrowers and will receive the best rates.

How to Determine Your Credit Score

There are many details that come into determining your credit score through each credit bureau, which means that paying your bills on time and in full isn’t enough. Take into consideration how many accounts you have, the amount of any outstanding debt you have and how many credit inquiries are made on you. It’s wise to check your credit reports annually to ensure that everything included is accurate. It can also help you to become familiar with the scoring criteria of each credit agency. Take advantage of free credit reports from websites like Credit.com.

How to Improve Your Credit Score

After you have viewed your credit reports, you can check for any false information and report it to that particular credit bureau. Follow up later and check to see that these mistakes have been corrected. You can also check for any risk factors to your credit score and work toward correcting them to improve your score. Risk factors that can adversely affect your score include credit utilization, payment history, your period of credit history, new credit inquiries and combination of credit accounts. It’s important to note that the percentages of each may vary depending on the credit bureau.

Building and maintaining the best credit score possible is a deeply involved process. It means you must pay your debts on time, borrow no more than 10 percent of your credit limit and keep your debt at under 30 percent. Equally important is keeping your credit accounts open for years and avoiding bouncing from one credit account to the next. You can really benefit from having a good mix of credit accounts, but avoid applying for new credit unless you absolutely need it.

Following all of these guidelines will ensure that your credit score will increase to an excellent level.
 
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