What is a Credit Score?
Your credit score can make or break you financially. It determines whether you can get a loan or credit card, it determines whether or not you’ll get a high or low interest rate, and it can even help you get your utilities turned on in your new home or apartment.
A credit score is a three-digit number generated using information from your credit report. It’s used to predict risk. Further, it’s meant to predict the likelihood that you will become delinquent on payments in the two years after the score is generated.
The most popular of all credit scores out there is the FICO credit score. Ninety percent of all financial institutions in the United States use FICO when making decisions about credit and loans. A FICO score can range from 300 to 850. The higher the number, the lower the risk, the better for the consumer.
The data that goes into your credit score includes:
- Payment history: 35%
- Amounts owed: 30%
- Length of credit history: 15%
- Types of credit used: 10%
- New credit: 10%
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