December 24, 2017
From the moment that you become an adult, your credit history and score become a definition of your responsibility level in the marketplace. You start out with no credit at all, but slowly gain it through paying bills on a timely basis. Look up your credit score today. You might fall in the fair-to-good range. Understanding what this score means can help you move into higher brackets that only improve your chances at better interest rates and larger credit lines.
The Overall Range
According to Experian, there are five levels that you can belong to in the credit world. Poor, fair, good, very good and exceptional are the basic terms connected to various numbers. When you have a fair-to-good score, you fall between the numbers of 580 to 670. The 580 is at the bottom of the fair range with the 670 marking the start of the good range. For many consumers, this range is typical when there are a few defaults and good payments mixed in with the history.
What it Tells Creditors
Ideally, you want to be closer to the 670 number as a borrower. Nearly a third of all consumers in this bracket will become delinquent with an account at some point. You may be new to the credit world if you fall into this bracket too. People who lack credit entirely don’t have enough experience to gain a higher number. They must use their credit wisely until the score slowly goes up.
Improving the Score
Depending on the credit bureau doing the reporting, your score can range from 300 to 850. Being in the fair-to-good range means that there’s room for improvement. Improve your score by obtaining more credit, such as through a new credit card. Use the card sparingly so that the available credit is as large as possible. Continue to pay your bills on time too. Mix up the type of credit that you have so that creditors know that you’re using your financial resources wisely.
Understanding the Three Numbers
Requesting your credit score gives you more than just one value, reports the Consumer Financial Protection Bureau. Three bureaus offer their snapshot of your creditworthiness. Each bureau uses slightly different algorithms to create their final numbers. These numbers should be relatively close to each other. Lenders analyze each bureau’s findings so that they can determine the proper credit to extend to you.
You have a right to one, free credit report each year. It doesn’t contain your scores, but you can add them on for a charge. Analyze this information each year for any discrepancies. An accurate history reflects in your score so that credit can be easily obtained. Living with poor credit is difficult in any situation.