What is a credit score and how is it calculated?
Credit is simply the ability for a consumer to be able to borrow money in order to purchase a product or service. The most popular credit scoring system in the United States is based on the FICO (Fair Isaac Corp.) range. Your credit score will vary depending on which of the three credit bureaus – Equifax, Experian and TransUnion – is used.
To simplify this confusion, the three main credit bureaus partnered together to create the VantageScore. This scoring range starts at 300 as the poorest score and goes up to 850 as the highest range possible, or excellent credit. Specifically, poor credit ranges from 300 to 599, fair credit ranges from 600 to 659, good credit ranges from 660 to 719, very good credit ranges from 720 to 779, and finally, excellent credit which ranges from 780 to 850.
Why check your credit score?
There are many reasons to check your credit score. First, it’s good to know where you stand since the interest rate you receive on loans – including mortgages, auto loans, personal loans and more – is dependent on your score. And second, keeping an eye on your credit score can help alert you of any errors or fraudulent activity in your name. If you notice a sudden drop in your score, for example, you can pull your full credit report at Annual Credit Report and review it in detail.LEARN MORE