The Basics to Understanding your Credit Score pt3
What is a Good Score?
It is today’s most commonly used scoring system. FICO© scores range from 300-850 and most people score in the 600s and 700s. Lenders buy your FICO© score from three national credit reporting agencies, also called credit bureaus; Equifax, Experian and Trans-Union.
In the eyes of most lenders, FICO© credit scores above 700 are very good are a sign of good financial health. FICO© scores below 600 indicate high risk to lenders and could lead lenders to charge you much higher rates or turn down your credit application.
More than a Credit Score
There are many types of credit scores. They are developed by independent companies, credit reporting agencies, and even some lenders. As a rule, the higher the score, the better.
- Each credit reporting agency calculates your score and each score may be different because the credit history each agency has about you may also be different. Lenders may make a credit card or auto loan decision based on a single agency’s score, although others such as mortgage lenders often will look at all three scores.
- Your credit score changes when your information changes at that credit reporting agency. This is good news! It means you can improve a poor score over time by improving how you handle credit.
- Many insurance companies use something similar when setting your insurance rates, called a “credit-based insurance score”. You may be able to improve your insurance score by improving how you handle credit, which in turn may lower your premium payments on auto or homeowners insurance.
- Some credit scores offered to consumers are just estimates and are different from the credit risk scores lenders actually use, although they may appear similar. Consumer reporting agencies and other companies sometimes use an estimated score to illustrate a consumer’s general level of credit risk. How might you tell whether a score is estimated? Ask the company if the score is used by most lenders. If it isn’t, it is likely to be an estimated score.
Tags: consumer reporting agencies, credit reporting agencies, credit reporting agency, credit risk, Credit Score, credit scores, fico score, fico scores, financial health, homeowners insurance, independent companies, insurance rates, loan decision, mortgage lenders, risk scores, score changes, scoring system
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