Each has slightly different scoring standards, so you could realistically have at least three different scores. Even with the regulations, there are three major credit bureaus (TransUnion, Experian, and Equifax). The Fair Crediting Act specifies which information the credit bureaus can collect and use as part of your credit score. The first automated credit scoring model appeared in the 1950s, but it wasn't until Congress passed the Fair Credit Reporting Act in 1970 that the process was regulated. For instance, you can have more than one credit score, and not all lenders use the same credit reporting agency to decide if they'll lend to you or not. It sounds simple enough, but there are some credit score basics that are important to understand. If you have a higher score, lenders consider you to be more trustworthy when it comes to the likelihood that you'll pay back the money you borrow. If you have a low credit score, lenders consider you more of a credit risk. Sometimes you'll also hear it referred to as a measure of your creditworthiness. The short answer: a credit score is a three-digit number that tells lenders how much risk you pose as a borrower when you apply for a new line of credit. How to check your credit score for freeĬredit score basics: What is a credit score?. Factors that determine your credit score."You're already hitting that pinnacle of what care about." A high enough credit score shows lenders and credit card issuers that you are less of a risk and more likely to pay back the loan, versus if you had a lower credit score. "If you're above 760, or 780, certainly you're already getting the best you can get," Droske tells Select. Anything higher, though, won't be more beneficial, nor would it get you a better offer with more favorable terms. But he says aiming for 780 is even better to be "the safest" in any type of lending situation. That way, they're safe for all loan types and cards."įor Jim Droske, president of the credit counseling company Illinois Credit Services (and someone who actually has a perfect credit score of 850), the threshold is 760 as well. "As such, I always tell people, shoot for 760 or better. "The best published interest rates for auto loans are 720+ and for mortgages 760+," financial expert John Ulzheimer, formerly of FICO and Equifax, tells Select. However, it comes with no additional benefits that you likely won't already get with a 760 score. It might be exciting for some to aim to achieve the highest credit score of 850. Investing +More All Investing Best IRA Accounts Best Roth IRA Accounts Best Investing Apps Best Free Stock Trading Platforms Best Robo-Advisors Index Funds Mutual Funds ETFs Bonds Help for Low Credit Scores +More All Help for Low Credit Scores Best Credit Cards for Bad Credit Best Personal Loans for Bad Credit Best Debt Consolidation Loans for Bad Credit Personal Loans if You Don't Have Credit Best Credit Cards for Building Credit Personal Loans for 580 Credit Score Lower Personal Loans for 670 Credit Score or Lower Best Mortgages for Bad Credit Best Hardship Loans How to Boost Your Credit Score Taxes +More All Taxes Best Tax Software Best Tax Software for Small Businesses Tax Refunds Small Business +More All Small Business Best Small Business Savings Accounts Best Small Business Checking Accounts Best Credit Cards for Small Business Best Small Business Loans Best Tax Software for Small Business Personal Finance +More All Personal Finance Best Budgeting Apps Best Expense Tracker Apps Best Money Transfer Apps Best Resale Apps and Sites Buy Now Pay Later (BNPL) Apps Best Debt Relief
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