So like, what’s my credit score?
|Your credit score can mean the difference between being denied or approved for credit, and a low or high interest rate. A good score can help you qualify for an apartment rental and even help you get utilities connected without a deposit.
What is a credit score?
Your credit score is a three-digit number generated by a fancy mathematical algorithm using information in your credit history. Your credit score is designed to predict the risk a lender is taking by lending to you or more specifically, the likelihood that you will not pay them back.
There are several different credit score models but the most dominate is the FICO score. According to myFICO.com – the website of the company that creates the FICO score – “90 percent of all financial institutions in the U.S. use FICO scores in their decision-making process.”
What is considered a good credit score?
FICO scores range from 300 to 850. The higher the score the the lower the risk for banks and the more likely you will get approved for credit and receive lower interest rates.
Generally speaking lenders consider a FICO score of 740 or higher to be very good. And scores under 640 are generally considered weak.
What are the factors that make up my credit score?
There are five major categories that make up your FICO score. Data from your credit report goes into these categories in a fancy mathematical algorithm that creates your score. And it’s important to know the scoring model weighs some factors more heavily than others.
- Payment history makes up 35 percent of your score. That means your account payment information, including any delinquencies and public records.
- Amounts owed makes up 30 percent of your score. That means how much you owe on your accounts. The amount of available credit you’re using on revolving accounts is heavily weighted.
- Length of credit history make up 15 percent of your score. How long ago you opened accounts and time since account activity.
- Types of credit used makes up 10 percent of your score. The mix of accounts you have, such as revolving (credit cards and installment (house or car loan).
- New credit makes up 10 percent. Your new credit, including credit inquiries and number of recently opened accounts.