The following questions are often asked and rarely properly explained. Here are some basic questions and answers to credit and credit scores. This post is short and sweet, don’t want to bore you too much.
What is a credit score?
Your credit score is a measure of the trust that financial companies put in you to pay back your debts. The higher your score, the more trustworthy you are in their eyes. The more trust, the more credit cards with high sign up bonuses. The more credit card sign up bonuses, the more cheap/free travel. The more cheap/free travel the more….
Where can I check my credit score online?
You can check your credit score in a number of ways. If you use a site like creditkarma.com, you can obtain your free annual credit reports from two different credit bureaus.
This score does not contain your actual credit score.
What number should your credit score be? What are the credit score ranges?
You want to have excellent credit, and that is credit anywhere from 720 to 850. The other credit score categories are: Poor (280-590), Fair (590-640), and Good (640-720).
What credit score is good? “Good credit” is technically the second highest category of credit scores, and is associated with scores from 640 to 720. “Excellent credit” is anywhere from 720 to 850. Having a score below 640 will make it much harder to find financing and credit.
Why did my credit score drop?
Credit scores can drop for a number of reasons: inquiries to your credit, having new credit cards, high credit utilization, or missing payments.
Bigger penalties can stay on record for up to 7 years, whereas smaller infractions only stay for up to two years.
What credit score do you start with?
This can be a varying answer. Of course, before you have any type of credit, you have none. Many different factors can affect scores, from your job, spending habits, loans, bills, and so forth.
So data is being built on you all the time, all of which affects your score. Eventually, your score can level out, but if you don’t have a lot of data on you then it can be a bit volatile in the begining.
Which credit score do lenders use?
The group that regulates the general credit score system is FICO, and that is the name of the score that is used by most lenders. Three different bureaus have their own credit score for you: Experian, TransUnion, and Equifax.
Other lenders may use their own individual system based off their own system.
How is a credit score calculated?
There is a complex algorithm used to calculate your credit score. However, generally your score is made of five different categories: Payment History, Credit Utilization, Credit History, Types of Credit, and Credit Inquiries/Requests for Credit. Read about the 5 Factors That Determine Your Credit Score.
How does a credit score work? Your score is a monthly snapshot of your current estimate of creditworthiness. Based on a number of factors, an algorithm will calculate a score.
This score is used by agencies to determine how much money they are willing to lend you, how much credit they would extend you, and what interest rates you can get on a variety of financial products.
What other questions about credit and credit scores do you have?