What is a Credit Score?

The credit score is a three-digit score used to help lenders determine the eligibility for consumers in granting their requests for credit. The better your score the better the terms you’ll receive for borrowing applications.

In the United States, a credit score is calculated by one of the three credit bureaus. Each credit bureau gives their own version of a given consumer’s credit score. The score is based only on the credit history from an individual’s credit report. The FICO score is the leading brand of credit bureau risk scores in the United States; however, the Vantage score has become more popularized as of late (in large part due to the proliferation of Credit Karma). Although the two scores are similar they are not the same, the FICO scoring model is the industry standard while the Vantage score is not.

What Can You Do with a Credit Score?

More often than not, consumers care about their credit score because it can enable them or disable them from purchasing a home and acquiring a mortgage with a good interest rate. When it comes to interest rates, your credit score is at the forefront of your qualification for borrowing. If you have good credit, you’ll likely get a better interest rate and better terms than someone who doesn’t’. Credit scores may also be used when you apply to rent an apartment or apply for a job. However, if you don’t plan on using your credit for anything in the near term, it is solely a number for the cost of your potential acquisition of capital. Many consumers get caught up on their credit score and attribute social status to their scores. Having good credit is great an all but it is just a number at the end of the day and not something that you should harp on if you don’t plan on using it anytime soon.

What is the Minimum and Maximum Credit Score?

Credit scores range from 300 to 850. There are varying degrees of good and bad credit, however good credit typically starts in the 700ish range and goes all the way up to 850. Consumers who have a score near 850 are considered to have exceptional credit while those who are nearer to 300 are considered to have extremely poor credit. The bar is set pretty high in America as many consumers have good credit and good credit is to be expected as the default.

Despite what some think credit isn’t the end all be all. It’s nice to have good credit especially if you are making life changes like purchasing a home, etc., however you should be fee lesser if you don’t have good credit. Like anything else credit is quite dynamic and can be improved and fixed over time. If you’re currently stuck with fair or poor credit, you should considered opening up a secured credit card to help you provide a long term boost.