What Is A Credit Score?

Learn more about a credit score

A credit score is a number that helps financial lenders judge how good a prospect you are and how likely you are to make your credit payments on time.

Are Credit Scores Important?

Without doubt credit scores are very important.

They affect whether you can get credit and what you pay for credit cards, auto loans, mortgages and other kinds of credit. The higher the credit score, the more likely you to be approved for and pay a lower interest rate on new credit.

Financial lenders always look at your credit scores. They check your credit scores when deciding, for example, whether to change your interest rate or credit limit on a credit card, or whether to send you an offer through the mail. Having good credit scores makes your financial dealings a lot easier and can save you money in lower interest rates. That is why credit scores are crucial to your financial well-being.

What is a Good Credit Score?

For the majority of financial lenders, a FICO credit score of above 700 is very good and a sign of good financial standing. A FICO credit score of below 600 indicates a high risk to financial lenders and may well cause you to be charged a much higher interest rate or even be turned down for a credit application.

There are many variations of credit scores

Normally, when a lender refers to "your score," it generally indicates the FICO score developed by Fair Isaac Corporation. It is the most commonly used scoring system. The FICO scores range from 300-850. Try using a credit score calculator to estimate your credit score. Read more about a credit score calculator.

However, there are many other types of credit scores. They have been developed by independent companies, credit reporting agencies, and even some lenders. As a general rule, the higher the credit score, the better.

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