Key Insights

• Credit scores range from 300 to 850. A score above 670 is generally considered good.
• Lenders use credit scores to determine your creditworthiness and the interest rates you"9ll be offered.
• Other factors, like income, employment history, and debt-to-income ratio (DTI), also affect lending decisions.
• Closing old accounts can hurt your score by impacting your credit utilization ratio and credit history length.

What Defines a Good Credit Score?

• Ranges:
• Excellent: 800 - 850
• Very Good: 740 - 799
• Good: 670 - 739
• Fair: 580 - 669
• Poor: Below 580
• Impact of Good Scores:
• Higher scores mean better chances of loan approval and lower interest rates.
• Regularly check your credit score and reports to stay informed about your financial health.

Factors Influencing Credit Scores

• Payment History (35%):
• On-time payments boost your score. Missed payments significantly harm it.
• Credit Utilization (30%):
• Keep usage below 30% of your total credit limit.
• Example: A $500 balance on a $1,000 limit equals a 50% utilization ratio.
• Length of Credit History (15%):
• Older accounts positively impact your score. Closing old accounts may lower it.
• Types of Credit (10%):
• A mix of credit cards, loans, and mortgages is favorable.
• Recent Credit Inquiries (10%):
• Too many applications for credit in a short time can hurt your score.

VantageScore vs. FICO Score

• Differences in Models:
• FICO is used in 90% of U.S. lending decisions.
• VantageScore may weigh factors like credit age more heavily.
• Inquiry Treatment:
• VantageScore treats multiple inquiries within 14 days as a single inquiry, even across loan types.
• FICO may count them separately.

FAQs

• What's a good credit score for my age?
• Younger people often have lower scores due to limited credit history. On-time payments and responsible credit use can build a strong score early.
• Is checking my credit score OK?
• Yes, checking your own score is a "csoft inquiry" and doesn't impact your credit.
• How can I raise my credit score?
• Pay bills on time, reduce your credit utilization, and avoid opening too many new accounts.

Bottom Line

A good credit score (670+) is crucial for securing loans with favorable terms. Understanding what affects your score - like payment history and credit utilization - can help you manage your finances better and achieve long-term financial goals.

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