Credit Score 101: Understanding Your Score and Improving Your Credit

A credit score is a numerical representation of an individual’s creditworthiness. It is used by lenders to determine the likelihood of a borrower repaying their debts. Credit scores are calculated based on various factors such as payment history, credit utilization, length of credit history, types of credit used, and new credit applications.

Credit scores are calculated using mathematical models that analyze credit information from credit reports. The exact calculation methods may vary among different credit scoring models, such as FICO Score and VantageScore. However, common factors include payment history, amounts owed, length of credit history, credit mix, and new credit applications.

Credit scores typically range from 300 to 850. A good credit score is generally considered to be above 700. However, the specific definition of a good credit score may vary depending on the lender and the type of credit being applied for. Higher credit scores generally indicate lower credit risk and may result in better loan terms and interest rates.

Improving your credit score requires consistent effort and responsible financial behavior. Some steps you can take include paying bills on time, reducing credit card balances, avoiding new credit applications unless necessary, and regularly checking your credit reports for errors. It’s important to note that improving credit scores takes time and there are no quick fixes.

No, checking your own credit score does not lower it. This is known as a “soft inquiry” and has no impact on your credit score. However, when lenders or creditors check your credit as part of a loan application or credit approval process, it may result in a “hard inquiry” which can have a minor temporary impact on your credit score.