Don’t underestimate how important your credit score is.
By understanding the following four things about your score, you can stay on top of your financial situation and make your credit score work for you.
1. How Credit Score Ranges Work
As we will see, a good credit score can be beneficial in various ways, so it’s important that you understand what a good credit score actually is.
You can then work towards maintaining a good credit score.
There are different credit scoring models and different credit bureaus that use those scores.
The main bureaus are Equifax, Experian, and TransUnion.
For each credit scoring model, credit scores range from 300 to 850, with the lower amount being very poor and the higher amount being excellent.
The two main credit scoring models are FICO and VantageScore.
The credit ranges for each are as follows.
FICO Score Credit Ranges
Excellent: 800 to 850
Very good: 740 to 799
Good: 670 to 739
Fair: 580 to 669
Very poor: 300 to 579
VantageScore Credit Ranges
Excellent: 781 to 850
Good: 661 to 780
Fair: 601 to 660
Poor: 500 to 600
Very poor: 300 to 499
2. It Is Possible to Check Your Credit Score Regularly for Free
While you can request a free copy of your credit report from each of the credit reporting agencies, you can only do so once a year.
However, if you want to ensure you maintain a good credit score, you should consider accessing your score more regularly.
One of the best ways of obtaining your credit score for free on a regular basis is to use a money management app like SoFi Relay. You can check it here.
In addition to being able to track your credit score at no cost, with weekly updates to let you know when your score changes, you can view spending breakdowns, gain financial insights, and more, at no cost, to help you stay on top of your finances.
3. A Good Credit Score Is Important
With an excellent or good credit score, you can be approved for things like renting an apartment much more easily and you can get better rates for loans and things like homeowners’ insurance.
A good credit score can also unlock access to the best credit card rates, protection for major purchases, and other perks.
On the other hand, if you have a bad or average credit score, it can negatively impact your financial life. For instance, you could not be approved for loans and other products.
Having a bad or fair credit score also means that you’ll get less favorable loan terms if you are approved for a loan.
4. The Factors That Make Up a Credit Score
While the way in which credit scores are calculated differs depending on the credit scoring model that is used, some of the key factors that make up a credit score are:
- Your payment history, which refers to things like whether you pay bills on time.
- The amount you owe, which refers to the total amount of credit and loans you have in comparison to your overall credit limit.
- The length of your credit history, which refers to the length of time that you have had credit.
- Your new credit, which refers to how often you apply for and open new accounts.
- Your credit mix, which refers to how many types of installment loans, credit cards, and other loans and credit you have.
Also, you should study the best practices when it comes to owning and using a credit card.
Your payment history is extremely influential to your credit score and the type and duration of your credit and the percentage of credit you use are highly influential.
Your overall balances and debt are moderately influential and your available credit and recent credit behavior are less influential.
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