Credit Basics

What Is A Credit Score?

A credit score is a number generated by a mathematical formula that is meant to predict creditworthiness. Credit scores range from 300-850. The higher your score is, the more likely you are to get a loan. The lower your score is, the less likely you are to get a loan. If you have a low credit score and manage to get approved for credit, your interest rate will be much higher than someone who had a good credit score. So, having a high credit score will save you many thousands of dollars. 

What Is A Credit Bureau?

A credit bureau is a company that collects and maintains your credit information and sells it to lenders, creditors and consumers in the form of a credit report. There are dozens of credit bureaus, we're most concerned with the big three: Equifax, Experian, and TransUnion. 

How Credit Bureaus Determine your Credit Score

The percentages in this chart show how important each of the categories is in determining your credit score. We will help you to remove negative items from your payment history. We will also show you how to maximize your debt ratio score, even if paying off credit cards is not an option.

How Your Behavior Is Evaluated In Your Credit Report

Do you pay your bills on time?

 Payment history is a major factor in credit scoring. If you have paid bills late, have collections or a bankruptcy, these events won't reflect well in your credit score.   

Do you have a long credit history

Generally speaking, the longer your history of holding accounts is, the more trusted you will be as a borrower. 

Have you applied for credit recently?

 If you have many recent inquiries this can be construed as being negative by the bureaus. Only apply for credit when you really want it. 

What is your outstanding debt?

 It is important to not use all of your available credit. If all of your credit cards are maxed out, your scores will reflect that you are not managing your debt wisely.

Credit Score Ranges And Their Meaning

Scores:

800 and Higher (Excellent) 


With a credit score in this range no lender will ever disapprove your loan application. Additionally, the APR (Annual Percentage Rate) on your credit cards will be the lowest possible. You'll be treated as royalty. Achieving this excellent credit rating not only requires financial knowledge and discipline, but also a good credit history. Generally speaking, to achieve this excellent rating you must also use a substantial amount of credit on an ongoing monthly basis and always repay it ahead of time.


 700 - 799 (Very Good) 


27% of the United States population belongs to this credit score range. With this credit score range, you will enjoy good rates and approved for nearly any type of credit loan or personal loan, whether unsecured or secured. 


680 - 699 (Good) 


This range is the average credit score. In this range approvals are practically guaranteed but the interest rates might be marginally higher. If you're thinking 

about a long term loan such as a mortgage, try working to increase your credit score higher than 720 and you will be rewarded for your efforts; your long term savings will be noticeable.  


620 - 679 (OK or Fair) 


Depending on what kind of loan or credit you are applying for and your credit history, you might find that the rates you are quoted aren't best. That doesn't mean that you won't be approved but, certain restrictions will apply to the loan's terms.   


580 - 619 (Poor) 


With a poor credit rating you can still get an unsecured personal loan and even a mortgage, but the terms and interest rates won't be very appealing. You'll be required to pay more over a longer period of time because of the high interest rates.   


500 - 579 (Bad) 


With a score in this range you can get a loan but nothing even close to what you expect it to be. Some people with bad credit apply for loans to consolidate debt in search for a fresh start. However, if you decide to do that proceed cautiously. With a 500 credit score you need to make sure that you don't default on payments or you'll be making your situation worse and might head towards bankruptcy, which is not what you want.   


499 and Lower (Very Bad) 


If this is your score range you need serious assistance with how you handle your credit. You're making too many credit blunders and they will only get worse if you don't take positive action. If you are thinking of a loan (which won't be easy), the rates will be very high and the terms will be very strict. We recommend that you fix your credit first before applying for a loan. 

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