A credit score is a number, usually between 300 and 850, that provides a snapshot of a consumer’s creditworthiness. Lenders use these scores to determine whether a borrower qualifies for a loan, and in many cases, to set interest rates and other terms. By checking and maintaining a score of good or better, customers can qualify for Best rewards credit card and other loans.
What is a good score?
Two companies dominate the market for credit scores: FICO (opens in new menu) and VantageScore (opens in new menu). FICO considers a score of 670 to 739 to be good, while VantageScore considers a score of 661 to 780 to be good. FICO (opens in new menu) boasts that 90% of the top lenders trust their score, and consumers need to focus on their FICO score first. Credit card companies, however, often look at FICO and VantageScores.
How do you measure up to other borrowers?
The average FICO score in the US will be 716 in 2022. And as the chart below shows, about 67% of US consumers have a good score, or better. according to the Experian (opens in new menu). About 20% of adults in America are “invisible debt” or “unscorable,” meaning they have little or no credit history, and as a result, no scores.
The latest edition of the VantageScore also uses a 300 to 850 scale, with 61% of Americans having a VantageScore of Good or better.
How to check your score?
Many banks and credit unions offer free monthly FICO scores for consumers, so check your report online. Experian, one of the big three credit bureaus, also provides a free credit score and report to www.freecreditscore.com (opens in new menu). To check your VantageScore, sign up for Chase Bank’s free credit monitor service, Credit Travel (opens in new menu)or see other programs offered by VantageScore (opens in new menu) partners
Check your score using FICO or Vantage, known as “soft pull,” will not affect your score. But when you apply for a credit card or loan, the lender will do a “hard pull,” running a report that temporarily lowers your score. That’s why it’s so important to know your credit score before applying for a loan or credit card. If you’ve applied for several credit cards and been denied, for example, your credit score will be lower and it will be harder to qualify for a new card until later. get your score.
Why do I have more than one score?
There are many factors that determine your score. FICO and VantageScore base their algorithms on the same basic data but place a different weight on the same score. FICO and VantageScore get the following information from three credit bureaus to track your credit history: Equifax, Experian and TransUnion. As a result, you may see different scores depending on whether the data was pulled from all three agencies or just one.
There are also different versions; sometimes the lender will use a score obtained from the latest version or rely on an old, even years old algorithm. For example, after a study by the Consumer Financial Protection Bureau (CFPB) in 2022, it was found that one in five Americans reduced by medical debt (opens in new menu)three agencies announced that they would change their credit report does not cover certain types of medical debt.
What will affect my score?
Of all the credit reporting and scoring services, these are the most important factors that go into your score.
Payment history it is based on your record of paying bills on time and is the most important criterion for determining your score. Late or missed payments can significantly lower your credit score.
Use of credit it reflects the amount of credit you are using relative to your credit limit. Using more than 30% of your available credit may lower your score.
Length of history refers to the amount of time you have had access to your accounts. A long history shows many of your debt management habits.
Consolidation of debts refers to the types of credit you rely on. Having both paid salary (mortgages and car loans) and spinning around (credit card) loan will increase your score since it shows that you can handle different types of payments and terms.
New credit information or applications can lower your credit score by creating a “hard pull” and lowering your average long-term credit history.
Tips for increasing and protecting your credit score
Pay your bills on time and if possible, pay the full amount due each month.
Lower your credit utilizationpreferably less than 30% of your credit limit
Don’t close old credit card accounts. If you’re thinking about closing a credit card you’ve had for years to avoid an annual fee, consider asking the issuer four transfer the account on the same card for free. Even if you don’t use the card, you keep your long history.
Check your credit report and credit score from time to time. Watch for false information or fraudulent activity, and identify it how to improve your credit report if you find any errors.
Once you have a good credit score, or better credit score, don’t rest on your laurels. Good credit history, such as keeping up with all your debt or loan payments, can help you qualify for loans in the future.