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CREDIT SCORE
A credit score is like a GPA. On your report card, teachers grade you by your ability
to do work accurately in class. On your credit report, lenders grade you on your
ability to manage your credit wisely. The more responsible someone is with their
credit accounts, the higher their score. The less you use credit or the more poorly
you use of credit, the lower the score. Base FICO scores range 300-850 points.
While not all lenders use the same number cut-off points, a general assessment
of credit scores looks a bit like this:
750-850 Excellent Credit
700-749 Very Good Credit
650-699 Good Credit
600-650 Fair Credit
300-600 Poor Credit
A higher credit score gives a person more flexibility when they need or use credit.
It will most likely be easier for them to get credit lines and be approved for higher
credit amounts.
Credit is scored on five different factors:
n
NEW CREDIT
When a person opens a new line of credit.
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TYPES OF CREDIT
Using more than one type of credit, such as a mortgage as well as a credit card.
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PAYMENT HISTORY
Paying bills on time is the best way to maintain a high credit score. If you don’t
pay your bills, they can be sent to collections. This will drop your credit score.
n
AMOUNTS OWED
Credit companies will look at how many credit accounts are carrying balances,
if the user is close to using the full limit and/or maxing out credit cards often,
how much is left on installment loans compared to the beginning principal and
the total amount of money a person owes.
n
LENGTH OF HISTORY
How long the user has been responsibly, or irresponsibly, using credit.
Payment
history
Amount owed
Length of
history
New credit
Types of credit
35%
10%
10%
15%
30%
CHECK YOUR CREDIT SCORE
