Definition
A credit score is a three-digit number, typically ranging from 300 to 850, that represents your creditworthiness based on your credit history. Lenders use this score to assess the risk of lending to you. Higher scores indicate lower risk, leading to better interest rates and loan terms. The most common credit score model is FICO, though VantageScore is also widely used. Your score is calculated based on payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).
Frequently Asked Questions
What is a good credit score?
Generally, a FICO score above 670 is considered good, above 740 is very good, and above 800 is exceptional. For VantageScore, above 700 is considered good.
How often does my credit score update?
Credit scores typically update whenever there's new information reported to the credit bureaus, which usually happens monthly when creditors report your payment and balance information.
How can I improve my credit score?
You can improve your score by making on-time payments, reducing credit card balances, avoiding new credit applications, maintaining a mix of credit types, and regularly checking your credit report for errors.
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