Credit 101

There is so much to understand when it comes to credit. What is a good score? What is a bad one? How can I raise my credit and what brings my credit score down? Sometimes these things can be confusing, and even misleading. These days many people end up with bad credit scores simply because they didn’t know what they were doing and how credit works. So for those of us who can’t always understand all that legal mumbo jumbo posted on the backs of credit card applications, here’s a short crash course in the American credit system.

Basics: What is a credit score?

Just like the A or the F you got on your report cards in school, the credit score is a number which is supposed to represent how well you are doing with your credit. When your score is higher it is supposed to indicate to lenders that you have been managing your credit well. This score is used by banks and other financial institutions to determine the likelihood that you will be able to pay back any money that they loan you. The better your score then the more trustworthy, or creditworthy, you are. If you have a good score and banks consider you more creditworthy then they will be willing to lend you more and give you better rates. This is how having good credit works. But if you have a bad credit score, it can be difficult to get a new loan or credit card which can be devastating when you really need a new house or car.

What is a good or bad credit score? 

A good or bad score is somewhat subjective because certain companies or people may think of some scores as good scores even if another company may not. Generally the higher your score is then the better it is, but it is nearly impossible to have immaculate credit. As we’ll talk about when we discuss FICO and credit reporting agencies, there are different ranges of credit score depending on where you get the score from. The most popular is the FICO range, which is from 300 to 850. According to FICO, credit scores above 770 are considered excellent and at that point it doesn’t really matter if your score is higher you are already considered extremely creditworthy. Once into the 700-770 range of scores you are still considered to be very creditworthy. Think of this like an A on your report card and a 770 is an A+. Of course, you don’t have to have an A or an A+ to be considered creditworthy. The average credit score for someone with good credit is around 650. 620 is where things start to get murky though. This score is the difference between good and bad credit. Most financial institutions consider 620 to still be good credit, but anything lower is going to start to be not so good. There is still some leeway with a score of around 600, but much less than that and you are likely going to be completely denied further credit. Anything less than around 550 is considered absolutely terrible. credit repair company

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