Essay On Credit Score
A credit score is a three digit number used to determine the creditworthiness of a citizen of the United States. Credit scores are calculated by a mathematical algorithm. There are a many methods that can be used to calculate one’s credit score, however, according to Bankrate.com, the FICO score is the most popular among our country. Scores can range from around 300 to 850. Many factors go into calculating a credit score including payment history, amounts owed, length of credit history, types of credit used, and new credit. In marriages, both partners have their own individual score.
Credit scores are important for when you visit a lender to receive a loan. They will receive and review your credit score to determine your level of financially …show more content…
The first is payment history this is a review of your payment information which includes delinquencies. The second is amounts owed. The third is length of credit history, this means how long you have had your accounts open or time since the last activity in your account. The fourth is types of credit used which is your mix of accounts. The last is new credit which includes recent credit inquiries and the number of recently opened accounts. Using this scoring system, certain categories are weighted more heavily when calculating your credit score.
Good credit can be established by paying at least the minimum required payment and on time. Another way to positively impact your credit score is to never miss a payment and stay within your credit score. In doing so, lenders are more likely to find you financially responsible and it will be easier for you to receive loans. You also will avoid additional penalty fees.
Bad credit can be established by paying less than the minimum. Your credit score will also be negatively impacted if you pay too late, miss payments, or spend beyond your credit limit. Having too much debt will also have adverse effects on your credit score. With a bad credit score, it is difficult to borrow money. You will have to pay higher interest rates and won’t if you are able to receive a loan you will be faced with more restrictive terms. With bad credit, you could struggle at renting an apartment or
Credit scores are important for when you visit a lender to receive a loan. They will receive and review your credit score to determine your level of financially …show more content…
The first is payment history this is a review of your payment information which includes delinquencies. The second is amounts owed. The third is length of credit history, this means how long you have had your accounts open or time since the last activity in your account. The fourth is types of credit used which is your mix of accounts. The last is new credit which includes recent credit inquiries and the number of recently opened accounts. Using this scoring system, certain categories are weighted more heavily when calculating your credit score.
Good credit can be established by paying at least the minimum required payment and on time. Another way to positively impact your credit score is to never miss a payment and stay within your credit score. In doing so, lenders are more likely to find you financially responsible and it will be easier for you to receive loans. You also will avoid additional penalty fees.
Bad credit can be established by paying less than the minimum. Your credit score will also be negatively impacted if you pay too late, miss payments, or spend beyond your credit limit. Having too much debt will also have adverse effects on your credit score. With a bad credit score, it is difficult to borrow money. You will have to pay higher interest rates and won’t if you are able to receive a loan you will be faced with more restrictive terms. With bad credit, you could struggle at renting an apartment or