Credit Scores And Their Meaning

Credit Scores And Their Meaning

A persons credit score usually dictates the financial payments on previous credit.  If someone has no credit they will not have a credit score or it will be very low.  The lenders are taking risks by loaning money to the consumer.  Credit scores are made from mathematical equations.  These equations are generally too difficult for a normal person to understand.

Based on a credit score are loans, down payments, rates of interest, and length of loans.  The better the credit the score the lower the interest rate as well as term of the loan.

Credit scores range from 300 all the way up to 850.  A score of 300 is on the lowest end while a score of 850 is high.  People with high scores have made all their payments on time, have available credit, and have a low amount of debt compared to what their income is.

Many people who can get loans have scores from 600 and up.  Lenders prefer people with scores over 700.  The average borrower is around 680. The amount of the loan, the interest rate, and the term all will vary depending on the score.

The credit score is based on a few different factors.  The highest is on time payments, next is amount of credit used, after that length of credit history, and finally the type of credit used and the amount of times the credit rating has been looked up.

There are 3 major credit reporting companies. These include Trans Union, Equifax and finally Experian. Each of these have a distinct way of calculating credit so your score may vary but not significantly.

Credit scores are based solely on financial history.  There is no such thing as credit companies who will discriminate. In fact, its against the law.  Payments, credit history, debt to income are the major financial attributes. A good thing to remember is if you cannot afford something don’t buy it!

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