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A Guide to Your Credit Score

If there was a guide or book that contained your life's most important numbers, your birth date and social security number would probably be there, but did you know that you'd also find your credit score? If you're not sure how important your three digit score is in the day-to-day workings of your life, then this guide to your credit score could help you positively change your future.

Or, if you can't wait and would rather know in minutes what all three of your credit scores are then start here and get your Free* Credit Score! It's fast, easy and secure!

To begin with, the more substantial goals that most people seek such as buying a house, securing a loan for a new car, obtaining an additional credit card or even a landing a job can be positively or negatively affected by your credit score. That said, the five most popular topics useful in understanding your credit score are:

1) What is a good credit score?

2) What is the highest credit score you can have?

3) How to read a credit report.

4) What affects a credit score?

5) What credit score do you need to buy a house?

What Is A Good Credit Score?

If you don't know what the magic good credit score number is, you have lots of company. Even though the phrase "good credit score" seems to be everywhere these days, most people aren't clear what the actual number is. In general, a good score is 700 and any number above that is considered an excellent credit score.

Credit scores range from the 300s to the highest score of 850. The typical or average credit score for many is in the 600s and 700s. As a rule, the higher your credit score, the better financial clout you'll wield. Nevertheless, most people don't have the coveted 700 plus excellent or "good credit score."

Almost synonymous with the term "credit score" is FICO score. FICO® (Fair Isaac Corporation) is responsible for developing the numeric system that calculates your credit score which is then bought by one or all of the three major credit rating bureaus or agencies: They are:

  • Equifax
  • Experian
  • TransUnion

Your credit score is not finished with its journey yet. At this point, credit card companies, lenders, employers, even insurance companies buy your credit score from one or all of the three credit scoring bureaus. The reason they want your credit score is to help them decide whether you are a good credit lending risk or potentially responsible employee.

Would you like to know all three of your credit scores? It only takes a minute? Start here and get your Free* Credit Score! It's fast, easy and secure!

What Is The Highest Credit Score You Can Have?

The truth is, you don't have one credit score. You have at least three. This causes discrepancies because each credit reporting agency computes your score from three varied credit histories that could be more or less extensive or up-to-date than the next.

To address these inconsistencies or flaws in the system the three credit bureaus have developed a more cooperative credit scoring calculation called VantageScore This new scoring system uses a combination of scores from all three credit bureaus. The goal is to achieve a more accurate overall credit score because there is a smaller margin for error from bureau to bureau.

The VantageScore is similar to the FICO, but the credit score range is divided differently. The highest credit score is not the FICO 850 but now 990. The credit score range is no longer 300-850 but instead ranges from 501 to 990. Additionally, VantageScore makes use of letter grades:

  • A: 900-990
  • B: 800-899
  • C: 700-799
  • D: 600-699
  • F: 501-599

How to Read a Credit Report

If you know your credit score why is it also essential to read your credit report? The U.S. government deems by law that you are eligible to request three free credit reports from each of the major credit bureaus per year via the Annual Credit Report service. Certain states (Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey and Vermont) and other conditions (denial of credit) allow for additional free reports within a year.

Since your score is determined from the credit-related information on your credit report which is an analysis of your three credit scores, and the two are inextricably linked why not take advantage of your free credit reports?

Perhaps you've avoided reading your credit report because you believe it will take too much time or be thoroughly confusing. If you have already ventured to read a sample credit report and are even more puzzled than before, the following tips should help simplify the process. Credit reports typically include these categories (in order of importance by percentage).

1) Your payment history (about 35%)

2) How much you owe (about 30%)

3) Length of your credit history (about 15%)

4) New credit (about 10%)

5) Other areas - (about 10%)
  • previous addresses and some personal information (variations are normal
  • and typically of no consequence)
  • public records - i.e., judgments and liens
  • inquiries

Expect that your Experian credit report will not read quite the same as either your TransUnion or Equifax report because each company formats and categorizes your report in their own fashion. Even though you may be tempted to read only the category comprising the largest part of your report (payment history), don't skip over the other areas - they can still be powerful tools that work in your favor or create obstacles you don't want.

In addition to Experian, Trans Union and Equifax, there are a number of independent companies, credit reporting agencies, and even certain lenders who have their own rating systems for formulating your credit score.

Do you know all three of your credit scores? It only takes a minute to get your Free* Credit Score! It's fast, easy and secure!

What Affects Your Credit Score – Tips to Practice

As mentioned before, your credit report is an evaluation determining your credit score. So, credit reports which include (your payment history, how much you owe, length of your credit history, new credit and miscellaneous personal information) do reflect what affect your credit score. It's wise then to know what actions will and will not improve your credit score. Here are some tips to help you achieve and keep a good credit score:

  • Pay your bills in full and on time.
  • Even if you have thousands of dollars in available credit, avoid spending more than 25 percent.
  • Hold on to your job or reduce periods of unemployment.
  • Minimize requests for new lines of credit.
  • Don't spend or carry more than 80 percent of your total amount of available credit.
  • Seek substitutes for bankruptcy.
  • Find alternatives to liens or foreclosures.
  • Maintain a variety of accounts (e.g., real estate, installment credit, credit cards, retail/department store cards).

What Should NOT Affect Your Credit Score?

Credit or consumer scoring agencies, by law, are not allowed to consider such variables as your race, color, religion, national origin, sex and marital status when figuring your credit score. It is also not permitted to let public assistance or the use of any consumer right under the federal Equal Credit Opportunity Act or the Fair Credit Reporting Act to affect your score.

What is a Good Credit Score to Buy a House?

If you're interested in buying a house, your FICO credit score is crucial. What credit score number you'll need to qualify for a home loan will vary on the type of loan you want. Securing a federally backed loan such as an FHA (Federal Housing Administration) or VA (Veterans Affairs) requires a lower base credit score (620) than a conventional loan, and approval could happen within a matter of days. To obtain a non-government backed or conventional loan, your minimum credit score needs to be at least 680.

The rule of thumb is the greater your credit score the faster your loan will be approved and the lower your interest rate will be. Over a typical 30 year home loan, a higher credit score could save you thousand and thousand of dollars!

Reading this Guide to Your Credit Score is a powerful first step toward taking control of your financial future. Another proactive step is to use CreditScore.org credit monitoring services to help you improve your credit score so you can get what you want in life - like buying a house for less, getting a new car or even landing a good job!

Get all three of your credit scores? Start your Free* Credit Score! It only takes a minute. It's fast, easy and secure!

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