What Does Your Credit Score Mean?
The higher your credit score, the better it is.
Your credit score is a measure of your credit history. It helps potential lenders determine whether or not you are a good credit risk.
Your credit score is a number between 400 and 850, that lenders use to help them decide whether you are likely to pay them back on time. The information contained in your credit reporting agency files is used to calculate your credit score. This score will affect your ability to get credit and the interest you will pay for it.
High vs. Low Credit Scores
Low Scores: If your credit score is on the low side, then lenders assume that you will be less likely to pay them back on time. They will either charge you a higher interest rate or possibly even turn your credit application down altogether.
High Scores: If your credit score is in the high range, then you probably will be able to get better interest rates. This is true for all types of credit, including mortgages. Getting a lower interest rate on your mortgage can save you hundreds of dollars a year and thousands of dollars over the life of your loan.
What is a FICO Score?
The most well known score is the FICO® score, named after Fair Isaac and Company, the company that developed it. Each credit reporting agency uses this scoring model, but each has its own name for the credit scores it uses:
- Equifax® = Beacon®
- TransUnion® = Empirica®
- Experian® = Experian/Fair Isaac®
Any other score is not your FICO score. Because your credit file at each of the three major credit reporting agencies may differ, your scores may differ as well.
How Your FICO Score is Calculated
Your FICO score is calculated based on your payment history, the amounts you owe, your level of new debt, the types of credit you have used and how long you have been using credit.
How To Improve Your Credit Score
It’s a good idea to obtain your credit scores every year. Look over your credit reports to pinpoint anything that might be keeping your score down and determine what steps you can take to improve it.
BrightScore’s Credit Analysis will help you get on track.