Your Credit Score: What the Number Really Means (and What It Doesn’t)
Everyone knows that their credit score is important – but most Americans don’t understand how the scores are assessed or affected by their actions. Ideally, you want a credit score in the 700-800 range, but what does that really mean – and how do you get there?
Your credit score is calculated by one of the credit reporting agencies – EquiFax, Experian, and TransUnion. These agencies assign your credit score based on current and historical factors, and the score is an assessment of how likely it is that you’ll repay any debts that you accrue. The majority of the score is related to your past payment history and your current level of debt.
Lenders use your credit score to determine how risky it would be to lend you money. With higher credit scores, your loan terms and interest rates will be much better. If you have a lower score, you’ll be assigned a higher interest rate, since the risk is greater for the lender. If your score is low enough, you may not even be approved for the loan or credit card. (more…)