
<p>What do you think of when you hear the word &#8220;credit?&#8221; Do you think of different credit card companies like MasterCard or Discover? Or maybe you recall getting your first car and hearing about car payments affecting your credit.</p>



<p>Plenty of people know the word credit but don&#8217;t realize how integral a role it plays in their lives. Your credit scores are keys to financial freedom and security. A high credit score can go a long way to securing stability for yourself and your family.</p>



<p>If you&#8217;re new to the world of credit scores, don&#8217;t worry! In this article, we&#8217;ll answer all the vital questions you might be asking. So, without further ado, let&#8217;s get started.</p>



<h2>What Is A Good Credit Score?</h2>



<p>When you&#8217;re first exploring the world of credit scores, the first question you&#8217;ll likely ask is, &#8220;what is a good credit score?&#8221; As the name implies, systems determine credit through a numerical score.</p>



<p>The most common scoring system is the FICO (Fair Isaac Corporation) system. This scoring system measures a credit score on a scale of 300-850.</p>



<p>This scoring system is the standard for determining credit and is the preferred system by the top three credit reporting agencies. Those agencies include Experian, Equifax, and Transunion.</p>



<p>In this system, you&#8217;ll often see various numerical ranges that have a general worth. Some creditors define these ranges differently, but the average system looks like this:</p>



<ul><li>Excellent Score = 800-850</li><li>Very Good Score = 740-799</li><li>Good Score = 670-739</li><li>Fair Score = 580-669</li><li>Poor Score = 300-579</li></ul>



<p>When you&#8217;re building your credit, let 670 be your minimum score goal. &#8220;But,&#8221; you ask, &#8220;what about a score that&#8217;s lower than 670?&#8221; We&#8217;ll answer that question in the section below.</p>



<h2>What Is A Bad Credit Score?</h2>



<p>Since you&#8217;ve seen the scoring rages in the previous section, you know what scores qualify as &#8220;good&#8221; scores. Let&#8217;s talk a little bit now about&nbsp;<em>why&nbsp;</em>a bad score is bad.</p>



<p>Lenders of all kinds use your credit score to determine whether you are a worthwhile investment. In other words, if they were to give you the money or product you request, your credit score indicates whether you&#8217;ll pay them back.</p>



<p>If you have a poor score, one that falls between 300 and 579, you may have trouble getting a loan at all. If you do happen to receive one, it will likely come with a much more sizeable interest rate. That interest rate serves to compensate the lender if you don&#8217;t manage to make all your payments.</p>



<p>However, loans aren&#8217;t the only transaction that your credit score affects. A&nbsp;<a href="https://www.thebalance.com/having-good-credit-score-960528">good credit score&nbsp;</a>could result in you not having to pay a security deposit on a smartphone. It could also reduce the deposit amount you need for utility services or when renting an apartment.</p>



<p>A good credit score can also result in higher credit card spending limits or reduced car insurance payments. It will also make taking out a mortgage much simpler.</p>



<p>A bad credit score, however, will undo all of the benefits cited above. You will likely have to pay higher security deposits on purchases and services.</p>



<h2>What Affects Credit Score</h2>



<p>At this point, you&#8217;re probably wondering what factors improve or detract from your credit score. If so, we&#8217;ve got you covered. Experian, Equifax, and Transunion are the three primary credit reporting agencies in the US.</p>



<p>These agencies update, report, and store the credit histories of consumers throughout the US. The five critical factors they examine when calculating credit scores are as follows:</p>



<ol><li>Payment history</li><li>Total owed amount</li><li>The length of credit history</li><li>Types of credit</li><li>New credit</li></ol>



<h3>Credit Payment History</h3>



<p>Payment history accounts for 35% since it shows whether the person meets their payment deadlines on time. The more punctual you are in making payments, the better your credit score. Don&#8217;t put things off to the last minute!</p>



<h3>Total Owed Amount</h3>



<p>The total amount a person owes counts for 30% of their score. This factor measures the percentage of credit available to the person that they are currently using. Experts call this process&nbsp;<a href="https://www.investopedia.com/terms/c/credit-utilization-rate.asp">credit utilization</a>.</p>



<h3>Length of Credit History</h3>



<p>The length of a person&#8217;s credit history counts for 15% of their score. The logic behind this value is straightforward. The longer a person has been paying credit, the less risky there are; they have more data to examine when determining their risk factor.</p>



<h3>Types of Credit</h3>



<p>The types of credit you use accounts for 10% of your score. The two primary types of credit are installment credit and revolving credit. Installment credit includes regular payments, such as car loans or student loans.</p>



<p>Revolving credit usually comes from credit card usage. Several people mess up their credit score through poor decision-making with credit cards, so use them cautiously.</p>



<h3>New Credit</h3>



<p>New credit makes up the last 10% of a credit score. This factor examines how many new accounts a person currently has and how many they&#8217;ve recently applied for. This process produces credit inquiries to explore your account data.</p>



<h2>Improve Credit Scores</h2>



<p>The average credit score in America is approximately 700 on the FICO system. If you recall the previous scoring ranges, this amounts to a &#8220;good&#8221; score. If your score is not quite here or you&#8217;d like to&nbsp;<a href="https://pinnaclecreditrepair.com/how-to-increase-your-credit-score-fast/">raise it higher</a>, consider the following tips.</p>



<p>First, pay your bills on time. This practice goes a long way to improving your credit scores. However, don&#8217;t expect instant improvement; it&#8217;ll take six months or so to see a definite shift.</p>



<p>Second, if you don&#8217;t use a particular credit card, don&#8217;t close the credit line. Doing so would increase your credit utilization rate, which you should avoid.</p>



<p>Third, increase your credit line. If you have accounts in good standing, call and ask for an increased spending limit. A higher limit with little use looks excellent for your credit utilization rate.</p>



<h2>Work With A Top Notch Credit Repair Company</h2>



<p>As you can see, credit scores have significant meaning for you as a consumer. A good credit score can lead to much easier access to necessities like transportation, communication, and living space.</p>



<p>If you want to improve your credit score, be sure to follow the tips in the previous section. However, consider also working with a credit repair company.</p>


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