A credit score is a 3-digit number which is considered to be a screener for banks and another lender in determining how likely you are able to repay the debt or buy a house. These banks and lenders ensure that the credit score is in the safe territory before sanctioning any sort of loan or credit card. That being said, it is possible for an individual to have more than one credit score.
The 3-main credit assessing bureaus which create credit reports are Experian, Equifax, and TransUnion. Then, the credit scoring model such as the fico score range chart model or VantageScore makes use of this data to come up with a score which generally ranges from 300 and goes up to 850. That being said, the credit assessing bureaus can themselves calculate your scores by making use of their own models.
While the calculation of the score is underway, personal information such as gender, marital status, race or religion is not considered and make no difference whatsoever. In fact, what determines this number is factors such as:
- Whether the payments are being made on time: Timely payments make for good scores.
- The amount of credit that has been used after borrowing: Lesser the amount used the better the score.
- The time period between when the loan was granted and the entire payment along with the interest was made: The quicker the loan was repaid after receiving it, the better the score becomes.
- A number of applications for credit: The fewer times credit is made an option, the better the score becomes.
- Credit Category: The credit companies assess the score based on how flexible the credits were taken. Different credits for different things such as car loans, education loans, etc show the company that the individual knows how to balance credit and is good with their financials.
So now for the main question, what exactly is a good credit score?
There is no one specific answer to this question. However, there is a fairly straightforward explanation for it. The higher the number of the credit score, the better it is considered by the lenders and the more chances there are that you will be granted the loan.
A score between 800-850 is considered an excellent credit score to have. Between the numbers of 740-799, the credit score is considered to be very good, between 670-739 the credit score of the individual is good. Moving onto the lower ranges of between 580-669, things could get difficult as these numbers come under the category of a fair credit score. Lastly, the worse score to have is between the numbers of 300-579, which is categorized as very poor.
The very poor category is where the lenders will be hesitant in providing any sort of loans. The very poor credit score category people are most of the times required to make a payment or a sort of deposit in the rare case that the lender decides to approve them for the loan, however that scenario is a difficult one.
In conclusion, being as honest as possible and taking borrowed money seriously goes a long way in maintaining a high credit score. Loans are the way out during difficult times, therefore the credit scores must not be taken lightly as it could seriously hamper your borrowing abilities when you really need it.
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