Is a credit score important today? Absolutely. More than ever. Here, we'll talk about what scores are good or bad, and how to build yours into the excellent category.
Author:
Moneyzine Editor
1 mins
December 5th, 2023
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What Is Credit Score?
A credit score is a numerical value that summarizes all of the information appearing on an individual's credit report. Credit scores allow lenders and creditors to quickly determine the terms that apply to individual loans as well as qualify an individual for new lines of credit or loans.
Credit scores are frequently used by traditional lending institutions, such as local banks, to determine the interest rate charged on a loan. A poor credit score can also result in creditors, such as an electric utility, to require a deposit prior to establishing an account.
Generally, a credit score is based on four criteria:
Loan repayment history
Outstanding loan balances
Credit history
Diversity of credit in use
There are three major credit reporting agencies: Equifax, TransUnion, and Experian. Each agency will have a slightly different method for determining a numerical credit score. Generally, scores range from 300 to around 800, with a national average in the 670 to 690 range.
Credit scores have a big impact on your life. They decide if you get a loan or a credit card, the interest rate you’ll be stuck with, or if you’ll snag your dream apartment.
Your credit score is a solid 650—but your neighbor just subtly told you that they finally reached 700. Is that how they got their flashy new car? Or is there a big money-making secret you don’t know about?
Financial institutions, as well as companies, will usually check an individual's credit score before extending new credit, or lending money. Better scores can mean lower interest rates on a loan, or eliminate the need to provide a deposit before receiving service from a utility.
Sweat is beading on your forehead—but you’re trying to play it cool. The salesman can’t tell you’re nervous, can he? Your credit is good enough— What if it’s not? Don’t put yourself through the above scenario—get educated before putting your dignity on the line at the car dealership.
Are you new to the world of credit and trying to build your score? If so, you may have heard that a 700 score is usually the minimum score you need in order to have "good" credit. But how long does it take to get a 700 credit score from 0? You may be surprised to know that it doesn't take long at all, and in fact, most people can reach a 700 credit score within a year!
Having business credit can ensure it won’t happen to you. It’s kind of essential, unless you want to crash and burn like the majority of new businesses out there. If you’re thinking about making your side hustle into a legit business, you’re about to face a huge learning curve. Stick with our guide to building business credit, and you’ll already be beating the competition before you even start the race!
Here at Moneyzine, also provide resources for those looking to invest, save, and build wealth. From trading app recommendations to a practical car lease calculation spreadsheet, we cover a wide spectrum of financial topics to meet your diverse needs.
The below investment apps have been researched, reviewed, confirmed, vetted, re-vetted, and then ranked based on eight categories: account minimum, trading costs, account fees, selection, ease of use, sign-on bonus, education, and customer service. These are the investment apps that made the grade.
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