Are you new to a credit card? Perhaps you just turned 18 and want to apply for a credit card? This post covers the basics of the credit score. I could remember when I was like you trying to figure out what the heck credit Score is, and how it affects my credit card application.
What Is a Credit Score?
Simply put, a credit score is a number that tells credit card companies the probability of you paying back a new debt you intend borrowing.
What is a good credit score?
Normally, credit scores from 690 or above is a good credit score. Create a card company or lenders calculate credit score from your credit history, which is a report of your spending habits. (Debt or money borrowed from Bank, Credit Company, union or lenders).
Credit Score Overview
With this purpose in mind, all credit card companies and unions that issue credit cards to customers use a credit score to determine if an applicant will pay back the money borrowed. As such, they have a designed credit card information system that analyzes your credit history pulled from the three credit card report union.
What is a credit score?
To be specific, credit scores are a 3-digit number used to determine customers’ creditworthiness. Which depends on your past spending history.
Will Low Credit Score Ruin My Chance of Getting Approved by Credit Card Company?
No doubt, a low credit score determines if a lender will approve you for certain credit cards. However, people with a poor credit score can still get approved for a credit card only that they;
- Get declined often for a credit card.
- Pay a higher interest rate.
- Deposit before approval for a credit card.
- Pay more for car insurance.
- Make a down a deposit on utilities.
- Get rejected by most Landlords as Landlords use a credit score to check tenant ability to pay rent.
Why having a Good Credit Score is important?
Indeed, a good credit score allows you to access products, rewards, and benefits that aren’t available for poor credit customers. That said, to access low to zero introductory interest rate, no annual fee, and even special financing options for car, rent and even for home utilities, you will need a good credit score.
Credit Score Ranges FICO
To start with, Lenders calculate credit scores in ranges and in scaled according to users’ spending habits (credit history). Therefore, there are two systems for calculating a credit score. First, VantageScore 3.0. Second, FICO 8. Scores start from 300 to 850.
Though, a lot of credit companies and creditors have their unique system for determining what a good credit score range is. However, in the general view, the below list is make up the credit score range.
300-579: Poor
580-669: Fair
670-739: Good
740-799: Very good
800-850: Excellent
Furthermore, It’s important to know that an excellent credit score measured using the VantageScore model will as well be an excellent score when measured with FICO 8 as both credit score model extract data from the three main credit bureaus.
What is the highest credit score you can have?
To be brief, the highest credit score there is according to the three Credit Bureaus; Equifax, Experian, and TransUnion are 850.
Credit Bureaus
Apparently, In the U.S., there are three national credit bureaus (Equifax, Experian, and TransUnion) that compete to capture, update, and store credit histories on most U.S. consumers. While most of the information collected on consumers by the three credit bureaus is similar, there are differences.
Average FICO credit score in 2020
In particular, the average FICO credit score as reported by Experian in 2020 is 705. According to the credit bureau, Experian’s data from the first quarter of 2020, women and men now share an average FICO credit score of 705. This is a 1-point increase for women from the second quarter of 2019 and about a 10-point increase for both groups since the second quarter of 2015.
However, the average FICO score in America is 695 and the average Vantage score stands at 673. Currently, Fair Isaac Corp’s FICO score and Vantage are two of the most widely used scoring models in the country. Both models range between 300 and 850 — the higher the score, the better.
First, it’s good to know that most credit card companies and issuance base their financial and the creditworthiness of a consumer on FICO scores results. 1 However, the three credit bureau has a different credit report model added to that fact that some creditors still don’t report to them.
Factors That Affect my Credit Scores
- Payment history for loans and credit cards. This includes the number and severity of late payments.
- Credit utilization.
- Length of credit history.
- Type, number, and age of credit accounts.
- The number of recent inquiries.
- New credit accounts you’ve recently opened.
What else Count Aside Credit Score?
To start with, a good credit score only doesn’t qualify you for money borrowing. It helps, but it’s not the only requirement. Also, a low or poor credit score does not mean you can’t get approved by lending companies. 2 That said, there are other factors lenders and credit unions consider before issuing a credit or borrow money to a consumer. Factors such as;
- Consumers income
- If you owe debt already
- Your asset
In other words, credit companies, unions, and lenders primarily use debt-to-income ratio calculation to measure if your budget can accommodate new loans or can be able to back if they should borrow your money.
Monitor credit score – How to Keep Track of your Credit Score
Indeed, the best thing you can do is to keep track of your credit score as to know what your credit score is at each point in time. Furthermore, It will help in easing lots of stress you would go through when you are ignorant of your credit score. Note that you must always check with your current score as the score fluctuate.
Where Do I check my Credit Score? Credit Score Sites
Apparently, the list you are about to view, you will come across sites that offer free and daily credit-score updates as well as sites that offer paid score checks.
- WalletHub – Score Updates Daily for Free
- Mint – Score Updates Monthly for Free
- Credit Karma – Score Updates Weekly for Free
- Bankrate – Score Updates Monthly for Free
- Quizzle – Score Updates Every 6 Months for Free
- com – Score Updates Monthly for Free
- LendingTree – Score Updates Monthly for Free
- Wise Piggy – Score Updates Monthly for Free
- Compare Cards – Score Updates Monthly for Free
- Free Credit Score – Score Updates Monthly for Free
- Credit Sesame – Score Updates Monthly for Free
- Equifax – Score Updates Monthly Free Trial (7 days) $17.95/month
- Identity Guard – Score Updates Every 3 Months Free Trial (30 days) $19.99/month
- My Score – Score Updates Monthly Free Trial (7 days) $29.95/month
- Free Scores and More – Score Updates Monthly Free Trial (14 days)
- myFICO