What is credit score – do you want to have the answer to this? In simple terms, credit score is a measure of your creditworthiness to the lenders. In other words, it is a measure of how likely it is that you will be able to honor your commitment when a bill is presented to you for payment.
If you want to what is credit score, you should also know about another concept, and it is the credit score range. The range is the figures between which the credit score is calculated. The lowest credit score is 300, while the highest is 850.
You should always know what your score is. However, in the United States, many people are unaware or rather ignorant of their score, and there are those who have no idea why maintaining a good score is so important. The fact is, your score is vital, if you want to take any kind of a loan, be it for the purchase of a home, automobile, an education loan or for anything else. In course of a survey conducted in 2005 by the Consumer Federation of America and Fair Isaac Corp (FIC), it was found that most people did not know that the score is considered by lenders when issuing a loan.
How the Credit Score Is Calculated
To calculate the score, Fair Isaac utilizes 22 types of data that is collected from major credit bureaus such as the Equifax (EFX), Experian (GUS) and the TransUnion when they want to find out what is credit score of a person. Here’s how the importance of this data is.
- Payment history – 35%
- Length of Credit history – 15%
- New Credit – 10%
- Types of Credit used – 10%
- Debt – 30%
- Income level – No reference at all
The person’s income level is not considered while determining his/her credit score. This is because, it has been found that a person may have a very high income, but may still not be good in paying back the owed money. The opposite is also true.
Can You Find Out What Your Credit Score Is?
The answer is “yes”. It is your credit score, and you have every right to know about it. The good news is, it is very easy to find this out too. All you have to do is just approach the right authority and ask – what is credit score, and furnish your details. The authority will then give you the details you want.