What is a credit score?
A credit score is a three-digit number, typically between 300 and 850, designed to represent your credit risk and the likelihood that you pay your bills on time. Simply put, a credit score indicates how well an individual has handled credit in the past and is an indicator of how well credit will be handled in the future.
Credit score ranges vary based on the credit scoring model used, but are generally similar to the following:
740-799: Very Good
How is my credit score calculated?
Credit scores are calculated using the information in your credit reports, including your payment history, the amount of debt you have, and the length of your credit history.
Why does my credit score matter?
Higher scores mean you have demonstrated responsible credit behavior in the past, which may make potential lenders and creditors more confident when evaluating a request for credit.
Your credit score is used to determine if you will be approved for a loan and what interest rate you will pay. Service providers and utility companies might also check it to decide whether you have to make a deposit.
When do I need to provide my credit score?
A credit score is important for major purchases; credit card issuers, auto dealerships, and mortgage lenders will check an individual’s credit score before deciding how much they are willing to lend and at what interest rate.
A credit score is also key for day-to-day interactions; insurance companies, landlords, and employers may look at a credit report to see how financially responsible an individual is before issuing an insurance policy, renting out an apartment, or extending an employment offer.