What are Credit Scores?
Credits scores are simple mathematical exemplifications that portray a person's creditworthiness. The scores are based on the individual's credit report, debt, and if bills have been paid on time.
What Information Is Present in Your Credit Report?
Your credit report will contain several essential details about yourself and your finances. The pointers mentioned below will help you understand more about the important details concerning your credit score report:
Description
Will present your name, social security number, date of birth, and address.
Credit payments
Determines when you received credit and by who. It will also present whether you made payments on time, how often you paid lenders, and your home loan interest rates.
Public archives
If you have any unpaid bills, delayed tax payments, filings for bankruptcy, and court hearings past or present, this section of the report will display that information.
Other Parties
If any inquiries were made by prospective lenders considering your credit report, this segment displays that particular information.
What Agencies Builds Credit Scores?
The three major agencies that build a credit score report for individuals are Equifax, Experian, and TransUnion. However, there are several other agencies that build credit scores, but the majority of institutions consider reports as authentic from the top three agencies only.
What is the Importance of a Credit Score?
Several institutions, such as banks, credit card companies, lenders, etc. They use your credit score number to determine the risk of lending money to an individual. The higher your credit score number the more chances you have to receive loans and higher credit card limits.
Credit Score Table
The table below will help you understand the range of credit scores that improve your chances of getting a loan or credit ASAP.
| Credit Score |
Chances of Getting Credit |
| 760-850 |
Very high |
| 700-759 |
Good |
| 660-699 |
Average |
| 620-659 |
Less |
| Below 620 |
Poor or fewer chances |
How are Credit Scores Calculated?
There are five different factors that agencies take into account to calculate an individual credit score. The below-mentioned pointers will describe these factors in greater detail.
Payment History
Accounts for 35% of an individual’s score and determines whether an individual has made his/her past payments on time.
Amounts Owed
Accounts for 30% of a person score and estimates the current credit rate available to an individual.
The Length of Credit History
Factors in 15% of the score and determines a person’s credit history. The metric states that the more extended the credit history the better as more data is available to check people’s payment records
Type of Credit
Takes into consideration 10% an individual’s score and finds out whether individuals have different credit payments to pay.
New Credit
Also considers 10% of a person's score and checks the number of new accounts a person has, and how many he/she has applied for in the future.
