Keep hearing about a credit score, but don’t really know what it is and how it might affect you financially? You have come to the right place to learn more about credit scores, where to find yours, and what to do to improve them if needed.
(Disclosure: Please note that this post is for educational purposes only and not to be used as financial or legal advice. For financial or legal advice, consult a licensed financial advisor or lawyer about your individual situation.)
What Is A Credit Score?
A credit score predicts how well you handle borrowing money including how likely you are to pay bills and loans back in a timely manner. Information from your credit report weighs heavily in a credit score. Organizations who may consider credit scores when deciding whether to do business with you or what rates that they will charge you include car dealerships, banks, credit card providers, insurance companies, landlords, potential employers, and more.
What Is The Credit Score Range?
The typical credit score ranges from 300 to 850. Because there are multiple companies and formulas for calculating credit scores this range may differ in some cases.
Are There Multiple Credit Scores?
Yes, as mentioned above, you may have multiple credit scores depending on who is calculating your score. FICO and VantageScore are the two most common. The FICO score, introduced in 1989 by the Fair Isaac Corporation, is still the most widely used among lenders and other credit checkers. VantageScore, growing in popularity, was introduced in 2006 by a partnership of the 3 major credit bureaus, Equifax, Experian, and TransUnion.
What Is A Good Credit Score? What Does Your Credit Score Need To Be To Purchase Car? House?
A good credit score varies depending on who is pulling your credit score and what specific criteria they are are looking for. In general, scores under the 580 to 600 range are considered poor or subprime. From there to about the 660-670 range are considered fair or near prime. After that some entities lump 660-670 up to about 780 together as prime and some split part of the range between good and very good. The top part of the range, where you find excellent and Super Prime, lies above that 780 up to 850 in many cases.
Although, there is no set minimum credit score that you need to buy a car, many lenders will require at least a 600 FICO score if you are looking for a loan for the purchase. The better your credit score, the better your opportunities generally are to obtain a more favorable interest rate meaning less money that you will have to pay out.
For a home purchase requiring a home loan, the minimum credit score will vary based upon the lender and the type of loan. Conventional loans generally require a minimum score in the 620 range. FHA Loan minimums start around 500 with a down payment of 10% required. At a 580 or above, you may qualify for a lower down payment. VA and USDA loan minimums vary depending on the lender (Experian).
How Do You I Get Copies Of My Credit Scores?
Get a Free copy of your FICO credit score and credit report from Experian. Credit Karma offers a free copy of your credit scores and reports from Equifax and TransUnion. Additionally, some banks and credit cards offer free copies of your credit scores as part of their member and card holder services.
What Can I Do To Improve My Credit Score?
- Pay your bills on time including paying off your credit card each month. Do not skip payments.
- Do not use any more than about 30% of your available credit from your credit card at any given time. If you don’t yet have a credit card, you may need to start with a student credit card (if in school) or a secured credit card (which means you prepay for amount of credit you receive with it).
- Check your credit report from each of the 3 major reporting agencies (Equifax, Experian, and TransUnion) at least once a year for any errors. If errors are found work with the credit bureaus to get resolved.
- Do not apply for too many loans or credit cards at once. When you make these applications, they count as hard inquiries on your credit report and may stay there for up to two years.
- Understand that building good credit takes time. Do not fall for “Fix your credit in days” scams as there are many out there.
Now that you know the basics of credit scores, learn more about credit reports and the information on them that places a big role in your credit scores.
