By Robert J. Semrad | Published July 15 2015 |
Your Credit Score Explained
Most people understand the importance of maintaining good credit. But what exactly is a credit score and how can you help ensure yours falls into the best range possible?
Your credit score is a three-digit number that offers a rating based on all of the information contained in your credit report. This document includes an overview of your history with how you handle paying off loans and other bills. The better the score you have, the more likely lenders are to approve loans, as banks do not like to take on a risky borrower if they can avoid it.
Although each lender has its own standards for what constitutes a good credit score, here are the general guidelines provided by the Fair Isaac Corporation (FICO):
- 300 to 629: Bad credit
- 630 to 689: Average or fair credit
- 690 to 719: Good credit
- 720 to 800: Excellent credit
The best way to build and keep a good credit score is to use credit responsibly — and to start doing so as early as possible. You should be sure to always pay your bills on time, keep balances low on all of your credit cards, and only apply for new credit and loans sparingly. Late payments and collections activity could severely damage your credit rating and, in turn, your chances of successfully applying for credit in the long term.
Even if you are able to successfully get credit with a lower rating, you will likely have to deal with much higher interest rates. On car loan or mortgage applications, for example, this could mean you would need a co-signer. Therefore, it’s important that you do everything you can to keep your credit score in good standing.
For further information and guidance on credit scores and how they affect your loans and ability to borrow, consult a skilled Atlanta bankruptcy lawyer at DebtStoppers by calling 678-673-2142 or contacting us online.