What is a credit score?

What is a credit score

Every time you apply for credit (mortgage or any other loan), the bank (or lender) would like to know what is the risk involved into loaning you money. Usually the lending institution issues a credit report and most of the time part of that report is your credit score. It helps the lenders evaluate your profile and your application for credit.

The credit score is just a number, rating creditors use to assess the risk when making lending decisions. There are two most commonly used credit score providers. The first one is FICO. And the second VantageScore. The components of the credit score are: the debt you currently have; number of credit cards you own and any unpaid amount on them; paying your bills on time; how much of your money is blocked monthly; how much your income is, etc…

The credit score range between 300 and 850, and it affects the financial decision if a loan is going to be granted to you or not. It could even be required and checked by landlords – and if low, there could be a refusal to rent a place. Your credit score influence the amount of credit available to you and the terms (interest rate, period, discounts, etc.) that lenders are going to offer.

A credit score of 700 or above is considered good. An excellent credit score is such of 800 or above. Keep in mind most people credit scores range between 600 and 750. The higher the score, the better credit decisions and more certainly a credit will be given to you.

There are sites online where you may check your credit score for free, anytime you need to. Example of such website is: Clearscore. Your credit score impacts all of your adult financial live, so check it out.

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