Credit Score Cheat Sheet
Do you know the three-digit number that plays a major role in your finances? The number that influences your ability to get approved for a loan and what interest rate you receive. The one that can influence your ability to get a certain job, or lease an apartment. It’s your credit score! Decoding your credit score can be confusing because so many factors can affect it. Different scores mean different things and a variety of elements influence the number. We created a helpful credit score cheat sheet so you can understand your unique score.
What Is My Credit Score?
First and foremost, you need to understand what a credit score is. Your credit score is a number used to represent how likely you are to repay your debt. The higher your credit score, the more lenders see you as a responsible borrower. In most cases, the higher your score, the lower your interest rate and the easier your ability to get a loan.
FICO Credit Score Scale®
Understanding your score in relation to the FICO® scale is also important. FICO® scores range from 300 to 850. Anything above 800 indicates to lenders that you are have exceptional credit, while scores 579 and lower indicate poor credit. Let’s break it down.
- 800+: You are an exceptional borrower. According to Experian, if you have a FICO®credit score of 800 or more, your score is much higher than the average U.S. consumer.
- 740 to 799: If you score is between 740 and 799, you are considered to have a very good FICO®credit score. Your score is still above the average U.S. consumer, and you may qualify for better interest rates.
- 670-739: Experian classifies a score between 670 and 739 as good. With a score in this range, you are right in line with the median credit score in the U.S. Financial institutions consider you an “acceptable” borrower.
- 580-669: With a score between 580 and 669 your score is slightly below the average U.S. consumer. FICO® classifies a score between 580 and 669 as fair. In this range, you may find it difficult to obtain a loan, and if you are able to, the interest rate may be higher.
- 579 & Lower: According to Experian, a score that is 579 or lower is classified as a poor credit score. If you are in this range, you may find it very difficult to get approved for a loan. If you are in this range, it does not have to be permanent. There are things you can do to rebuild your score.
What Elements Impact My Credit Score?
- Payment History (35%): FICO®advises that the first thing lenders want to know is “Do you pay your debt on time?”
- Capacity (30%): How high is your debt versus your total amount of credit? If a high percentage of your available credit is used, it can signal to lenders that you are more likely to make late payments or have missed payments.
- Length of Credit History (15%): In most instances, longer credit history will increase your FICO®credit score. This includes the age of your oldest and newest accounts, and an average age of all your accounts.
- Types of Credit (10%): Your FICO®score takes into account the mix of debt you have, such as: credit cards, retail store accounts, installment loans, mortgage loans, etc.
- New Credit (10%): Many lenders may see a red flag if they notice that you have opened multiple accounts over a short period of time. This is especially true if you don’t have a long credit history.
So there you have it. You now know what your credit score is, where you sit on the FICO® scale, and what factors determine your FICO® credit score. Keep in mind that there are other elements financial institutions take into consideration when determining your credit worthiness. If you are unhappy with your current FICO® score, follow these tips to start improving it.