Understanding The Credit Score Rating Scale
Anyone who has checked into their credit score has probably found the rating scale to be somewhat confusing. There are a bunch of numbers, each meaning something different. Understanding how this rating works will help you to read your credit score effectively.
There are several things that companies will review when building your credit score, including the following:
- Your past payment history
- Do you pay your bills by the due date?
- The amount of outstanding debt you have
- The length of your credit history
If you have a great deal of debt or you don’t have a very long credit history, you will receive a lower credit score even if there are no “black marks” against you.
Recent credit application also affect your score. Applying for credit in several places in a short period of time will lower your score, as will having too much high-interest debt.
Generally, a score of 700 or higher is considered good. If your score is in this range you shouldn’t have any trouble getting credit and you should receive the best interest rate possible.
If your score is between 450 and 650, it indicates that your credit needs some work to improve it. At this level you’ll likely have a harder time finding a loan or qualifying for a credit card without some type of security. You will also likely be paying a higher interest rate because you are considered a higher risk.
If your score is below 450, your credit is in need of some serious help. At this level you likely won’t be able to qualify for a loan or credit card until you pursue some form of credit counseling to improve your score.
If you need to improve your credit score, there are lots of places to turn for help. Many credit counseling services are free to use and they’ll help you assess your situation and offer advice for improving it.
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