Credit Score Basics

Whenever you decide to make a purchase on credit, whether you rent an apartment, buy furniture, or want a credit card or a loan, you are asking a business or individual to "take a chance on you", to grant you credit. Inevitably the lender or company will check your credit score to determine if you are credit worthy before making a decision. Credit score is a standard formula lenders use to determine how risky it would be to grant you credit. A number of predictive factors contribute to a credit score calculation. You may visit this article for the precise components that are considered in a credit score calculation.

Keeping your credit score up will make it easier to have financial flexibility. A high credit score increases the likelihood your credit application will be accepted by lenders. A great credit score will also get you lower rates of interest and higher credit limits for loans and credit cards. Generally speaking a good credit score makes dealing with lenders much easier. Conversely, a low credit score makes getting loans and credit cards difficult if not impossible. Lower credit scores translate to higher risk for lenders. To compensate they will ask for higher rates of interest and may limit the amount of credit they are willing to offer. Or they may simply reject your application for credit

All three major credit bureaus calculate credit score independently. Most lenders will obtain credit scores from at least one of the credit bureaus when deciding to grant credit. Often times institutions that make mortgage loans will obtain credit reports from all three credit bureaus before making a decision to lend.

Ways to improve your credit score:

Pay Bills on time - This is probably the best way to achieve a good credit score. Your credit history is a major factor in your credit score calculation.

Dispute incorrect information on your credit report - Inaccurate information does find its way on to credit reports. Experts recommend you obtain a free copy of your report each year and challenge any reporting errors.

Don't max out your credit cards- High levels of debt, including credit card debt will lower your score.

What is a good credit score:

Everyone has a credit score that is a number between 350 and 850. 350 is the lowest credit score you can have, while 850 is the highest credit score you can have. As your credit score goes higher less risk is associated with loaning you money. A general breakdown of how credit score relates to your credit ranking is:

Credit Score of 750 to 850: Excellent Credit
Credit Score of 660 to 749: Good Credit
Credit Score of 620 to 659: Fair Credit
Credit Score of 350 to 619: Poor Credit

There are so many benefits to having good credit. With your good reputation you can get a credit card or a loan easier. The chances of being offered a lower interest rate and saving money are definitely more probable.

What may not be used to calculate your credit score:

In the USA federal law prohibits lenders from considering race, religion, origin, sex, and marital status in credit decisions. Consequently you will not find these attributes in a credit score.