WHAT'S A CREDIT SCORE?
Posted on: May. 13, 2017 in Uncategorized

Do you know your credit score? You should, since it’s very often used to determine approval for things like loans, credit cards, employment, housing, and insurance premiums. While may find that a credit score is an unfair representation of themselves as a person, it doesn’t change the fact that this is how lenders, employers, landlords, and insurance companies are using it. Having a low score doesn’t make you a bad person, but it does make you appear as more of a financial risk.

If you don’t know your credit score, find out. Your bank and credit cards will often offer this information, though it can vary slightly from institution to institution. Credit monitoring services can also provide your score. You should also request a copy of your credit history from each of the three main credit bureaus, Experian, TransUnion, and Equifax. Each offers one free report per year, which you can request all at once or stagger throughout the year. By knowing your score and monitoring what lenders are saying about you, you’ll have a better idea of what to fix.

According to FICO, the average credit score in the U.S. is 695, which is considered fair. What do the other numbers mean?

  • Excellent: 750+
  • Good: 700 – 749
  • Fair: 650 – 699
  • Poor: 600 – 649
  • Bad: below 600

Here are the five key factors that are used to determine your credit score:

                Payment history: If you have been late, sent to collections, or have declared bankruptcy, your score will be lowered. Also, if you do not have a payment history because you’ve never borrowed money, your score will reflect this.

  • Outstanding debt: How much you owe already is also a factor, but it’s not the whole picture. Your debt-to-credit ratio is also important. That means that if you are close to your credit limit, your score will be negatively impacted.
  • Length of credit history: Simply put, your credit score is better if you’ve had account(s) for a long time.
  • New credit: If you’ve ever heard that opening new credit accounts can lower your score, it’s true. While it may seem like opening new accounts would help your debt-to-credit ratio, remember that the length of credit and payment history won’t be there on those new accounts. This isn’t to say you shouldn’t apply for new credit, just do so carefully and when needed.
  • Type of credit: This isn’t the biggest factor, but scorers will look at the type of credit you have. Ideally, you’ll have a good mix of credit:
    • Installment credit involves a regular payment with a set end point. Examples include a mortgage, an auto loan, and student loans.
    • Revolving credit allows you to borrow from a line of credit, up to a certain limit, and as long as you continue to make payments you can continue to borrow up to that limit. Credit cards and home equity lines of credit are examples of revolving credit.

If you’re ready for a new car but your credit is keeping you from getting approved, CreditYes can help with our bad credit auto loan program! We can match you with a dealership in your area that will be with you ever step of the way. Our service is fast and free. Fill out our secure online application and get behind the wheel of your next car today!



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