A credit score is a three-digit number that determines an individual’s creditworthiness and is used to represent their credit risk. Banks and lenders use this number to decide whether they’ll approve you for a credit card or a loan and what interest rate you will receive. A credit score typically ranges from 300 and 850; a higher score indicates the individual has a more favorable credit history.
The general breakdown for credit score ranges are as follows:
300 – 579 | Poor
580 – 669 | Fair
670 – 739 | Good
740 – 799 | Very Good
800 – 850 | Excellent
There are several different credit score models, but the most commonly used is known as the FICO score. Because there are multiple ways to calculate your credit scores, it is common to have multiple scores at the same time. Equifax, Experian, and TransUnion are the three major credit reporting agencies in the United States. Lenders are not required to report to all three agencies, which causes a discrepancy in your scores. The three credit reporting agencies may also have differences in the information they collect; however, there are five main factors that go into calculating a credit score.
As the information reported to the credit agencies changes, so will your credit score. You can monitor your score both with free and paid opportunities.
Under federal law you can obtain your credit report, not your credit score, for free each year. You can visit the website at annualcreditreport.com or call 877-322-8228 to request a copy of your credit reports by phone. You have the option to order all three reports at once or stagger them throughout the year. While the differences between the agencies may vary slightly, it will provide you a good resource for monitoring your score and your identity.
Some credit card issuers provide free credit scores for their customers. Ask your current credit card company if scores are available. While this will not provide you detailed information of what is impacting your score, you will be able to monitor changes in your score. There are also sites like Credit Sesame, Credit Karma, and Bankrate’s Quizzle® who partner with the major credit reporting agencies to provide you information about your credit score. FirstCNB is not affiliated with any of these sites, and the names are being provided merely for informational purposes.
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Future Blogs: How to Improve Your Credit Score | Why Your Credit Score Matters
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