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What is a credit score?

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Lending financial institutions know how responsible you are for your debt and credits using a credit score. Such a score is a numerical representation of your financial health. When the credit rating is high, you borrow and repay on time. On the contrary, when you have trouble repaying your debts, the score goes down.

What is a credit score

Credit unions like Equifax, Experian, and TransUnion collect information for an individual or business on the following headers to calculate a credit score:

Identity like social security number (SSN), name, date of birth, etc.

A detailed list of loans, credit card , and lines of credit.

Public documents such as bankruptcy filings, court judgments and liens.

Preliminary credit file requests from companies and individuals.

The three major credit unions in the United States use different credit models to assign a credit score. Therefore, you will always find different credit ratings from different institutes for the same company or person.

The Meaning of Different Credit Score Ranges

Less than 350 credit rating means no credit history. You need to speak with a lender to issue you a personalized credit account with a comfortable repayment plan.

Between 300 and 579 denotes a badly deteriorated credit history. The individual may have failed to pay on time for many credit accounts. If you can pay off all debts with interest, you may be able to repair those credit scores.

Between 580 and 669 credit score is a fair range. Lenders may offer you new credit accounts, but the underlying interest will be higher.

If your credit score is between 670 and 739 , you are in good shape. However, you may find it difficult to obtain unsecured loans at competitive interest rates.

When you pay all bills like credit cards, utilities, car insurance, and rent on time, you can get a 740 to 799 credit score.

Between 800 and 850 credit score means you are a low risk borrower and have no nicks in your credit account history. You will qualify for the lowest interest rates for any credit account in the United States.

What is a Vantage Score?

The three major consumer credit bureaus, Experian, Trans Union and Equifax, created the Vantage Score (300 to 850) method of calculating creditworthiness in 2016 to eliminate the monopoly of FICO scores.

In the FICO score vs. credit score, the Vantage Score plays a major role in communicating a person’s credit scores and helping them improve their scores if necessary.

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