How The Credit Score Rating Scale Works
July 24, 2008
If you’ve ever check your own credit score, you may have found the scale they use for rating you a bit confusing. There are a bunch of numbers that all have a different meaning. Learning to read your credit score properly means you need to understand the rating scale.
There are several things that companies will review when building your credit score, including the following:
- Your payment history
- Whether you pay your bills on time
- How much outstanding debt do you have?
- The length of your credit history
If you’ve got a lot of debt or you don’t have much of a credit history, you’ll get a lower score even if you don’t have any marks against you in the way of late or missed payments.
Recent credit application also affect your score. Applying for credit in several places in a short period of time will lower your score, as will having too much high-interest debt.
A score of 700 or higher is considered a good credit score. At this level, you shouldn’t have any problems getting credit, and at a low rate of interest.
A credit score of between 450 and 650 could stand some improvement. You’ll have a harder time finding a loan or qualifying for a new credit card application. You’ll usually require some kind of security as collateral. You’ll also usually pay a higher interest rate because of the perceived risk to the lender.
A credit score of less than 450 needs some serious work. You likely won’t qualify for credit at all at this level.
If your credit score needs improvement, there are a number of sources that can help. There are many credit counseling services available, many of which are free to use. They will be able to assess your financial situation and offer advice as to the best route to improving it - and your credit score along with it.
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