08 Apr What is a credit score?
What is a credit score?
A credit score is a number between 300-850 that depicts a consumer’s creditworthiness. The higher the score the better the borrower looks in the eyes of lenders. A credit score is a three-digit number designed to represent your credit risk, or the likelihood you will pay your bills on time.
Credit scores are calculated using information in your credit reports, including your payment history, the amount of debt you have, and the length of your credit history. Higher scores mean you have demonstrated responsible credit behavior in the past, which may make potential lenders and creditors more confident when evaluating a request for credit.
Here is a general look at credit score ranges:
· 300-579: Poor
· 580-669: Fair
· 670-739: Good
· 740-799: Very good
· 800-850: Excellent
What is your score made of?
The ingredients of your score are the following…
· 35% Payment history – do you pay your bills on time.
· 30% Amount of debt – do you have less than 30 percent of balances on your charge cards? Do you have a large amount of total debt?
· 15% Length of credit history – how long have you had open credit. The longer period demonstrates stability.
· 10 % Amount of new debt – have you opened new loan and charge card accounts.
· 10 % Credit mix – personal loans, charge cards, car loans and mortgages
This creates a FICO or credit score. This score is used in 90 percent of credit decisions and viewed by many potential landlords and employers.
Getting a copy of your credit report is a good idea
Sometimes negative credit on your report might not be yours and there is something you should dispute. These factors are important to address to protect your credit. Here is a link to a free credit repor
I hope this blog on “what is a credit score” was helpful. Call me with questions.
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