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Credit Score 101

The basics of a credit score

Your credit score is basically a numerical indication of your credit worthiness. It is the primary factor that creditors and lenders use to decide whether or not they should extend credit to you. You may also hear the credit score called the FICO score.

To calculate your credit score, a formula is used. This formula takes into account all the information on your credit report then comes up with the numerical summary known as your credit score.

Credit scores can range anywhere from 300 to 850. Most people have a credit score falling between 600 and 800. Higher scores are deemed better by creditors and lenders.

There are five key factors about your credit history that make up your credit score. These factors include the way you pay your bills, the way you use your credit, the age of your credit history, the number of times you ask for credit, and the types of credit you have.

Different types of lenders and creditors look at your credit score differently to determine whether or not you are credit worthy. If you are applying for a credit card, the credit card company will pay closer attention to the part of your credit history that pertains to credit cards. An automobile lender will look at your total amount of debt versus the total amount of income you have as well as the amount of your down payment.

You can find out your credit score by contacting any of the three credit bureaus: Equifax, TransUnion, or Experian. The cost of the credit score will vary among the bureaus. If you plan to apply for a credit card or loan, it is useful to obtain your credit score from each of the credit bureaus so you are aware of your standing before making the application for credit.