What is a Credit Score? What is a Credit Score Used For? By Justin Pritchard, About Guide Credit scores are important, but what is a credit score? A credit score is a number that says something about you and your borrowing history. To understand what a credit score is and how you can get a better one, you need to know a few things about credit. What Is Credit? Credit is your reputation as a borrower. It is a detailed history of your activity past seven years or so. Credit helps people decide whether or not they should lend you, give you a job, or issue an insurance policy. • What Is Credit? • How Credit-Based Insurance Scores Work What Is a Credit Score? A credit score is a number that describes your credit. A computer analyzes information at the credit bureaus (and may include information from your application) and spits out a score. • How Credit Scores Work • How Credit Bureaus Work What Is a Credit Score Used For? It is easier for lenders to use a credit score than two sift through your credit manually. They can make decisions more quickly, and reduce problems from discrimination and human error. What Is a Good Credit Score? The definition of a good credit score depends on the type of score being used. The FICO credit score, the most popular credit score, ranges from 300 to 850. A good credit score would be 720 or higher, but you can still get competitive loans at lower levels. Other credit scores have different ranges, and they may even use alternative measures such as letter grades (A, B, C, etc). What Is Credit Score Inflation? Just like grade inflation, credit score inflation is the practice of telling people they have a higher credit score and then they may deserve. Credit score inflation mostly exists with "secondary" credit scores - not the FICO credit score. When getting a loan, major lenders use your FICO credit scores. Make sure your FICO credit score is as high as it can be, and you can generally ignore other scores.
Posted on: Wed, 04 Sep 2013 13:22:57 +0000
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