![]() ![]() Length of credit history How it’s calculated: 15% of FICO score 21% of VantageScore 3.0 (part of depth of credit) On the other hand, if you have $5,000 of debt with a total credit limit of $20,000, your credit utilization score is only 25% despite having 10 times the amount of debt. It’s calculated by dividing the total amount of debt you have by the total amount of available credit you have across all accounts.įor example, if you have $500 of debt with a $1,000 credit limit, you have a 50% credit utilization ratio. This measures the amount of credit you're using relative to your available credit. Credit utilization How it’s calculated: 30% of FICO score 20% of VantageScore 3.0 Missing a payment can drop your credit score significantly. It measures whether you've made payments on time for your credit accounts, such as loans and credit cards. This is the most important factor in your credit score. Payment history How it’s calculated: 35% of FICO score 40% of VantageScore 3.0 For example, FICO places the most weight on payment history and amounts owed, while VantageScore places more emphasis on the age of credit accounts. » MORE: How to check your credit score What makes a good credit score?įICO and VantageScore look at various factors in calculating credit scores, assigning different weights to each category. It’s important to check your credit score by requesting your credit reports at least once a year. In general, people with lower credit scores can expect higher interest rates and more challenging approvals. Generally, a credit score of 670 or higher is considered good and may qualify you for favorable loan terms, including a lower interest rate.” For example, typically a homebuyer will need a higher credit score than someone who is applying for a small personal loan or credit card.Īccording to Leslie Tayne, a financial attorney at Tayne Law Group in Melville, New York, “A good credit score for someone wanting to take out a personal loan depends on the lender's specific requirements. Closing credit accounts can hurt your score because it can impact your credit utilization ratio and reduce the length of your credit history.Ĭredit scores range from 300 to 850, with 850 being “perfect.” Each creditor has its own benchmarks for a good or excellent score, but in general, an excellent credit score is any number above 800, while a good or very good credit score is between 670 and 799.Ĭompanies use credit scores to determine the likelihood that a borrower will repay a loan, with a higher credit score suggesting you’re more “creditworthy.” How credit scores are evaluated can depend on the situation.Lenders also consider other factors, such as your income, employment history and debt-to-income (DTI) ratio, when making lending decisions. ![]() Your credit score can affect everything from your ability to get approved for a loan to the interest rates you're offered.Whether you're just starting to build credit or trying to improve your score, we will help you understand what a good credit score is and how to get it. Having a bad credit score can disqualify you from financing and even affect your ability to rent an apartment. It's a three-digit number that lenders use to determine how risky it would be to lend you money or offer you credit.Ī good credit score can open the door to many financial opportunities, from mortgage approval to low-interest rewards credit cards. The term "good credit score" gets thrown around quite a bit, but what exactly does it mean, and why is it important? Simply put, your credit score is a reflection of your creditworthiness and financial history. ![]()
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