OppLoans Word of the Week: Credit Score
Remember when you were in high school and you got that D on a chemistry test (stupid valent bonds) and you thought to yourself, “Is this bad grade really going to affect my life?” Fast forward to the present day and you’ll see that, actually, that one bad grade maybe didn’t have a huge impact.
Well, there is one grade that matters more; in fact, it matters a lot more. This grade follows you around wherever you go. It follows you to the bank when you’re applying for a loan, it follows you to that new apartment you’re hoping to rent, it even follows you when you’re interviewing for a job! That grade is your credit score, and it might just be the most important grade you’ll ever get.
What is a Credit Score?
A credit score is a number that’s based on the information in your credit report, a document that tracks your history of credit use. Your credit report records data like how much credit you use, what kind of credit sources you’ve employed, whether you pay your bills on time, and whether you’ve ever been sent to collections or declared bankruptcy. Credit reports are created and maintained by the three major credit bureaus: TransUnion, Experian, and Equifax.
Your credit score takes all the information in your credit report and turns it into a single number; this number can then be used by lenders, landlords, and even prospective employers, to decide whether or not they want to do business with you. The higher your credit score, the better your credit.
What about FICO scores?
A FICO score is a type of credit score, but it also just so happens to be the score that’s most widely used. Most of the time, if somebody is talking about your “credit score”, they mean your “FICO score”. The FICO score was created by Fair, Isaac and Company in 1989. (The company has since changed its name to FICO.)
The FICO score is measured on scale from 300 to 850 (850 is a “perfect” score, and also not very realistic for anyone). Your FICO score weights different areas of your credit history more heavily than others. For instance, your payment history takes up 35 percent of your score and your total amounts owed takes up 30 percent. If your FICO score is below 630, you might have trouble getting a loan from a traditional lender. If that’s the case, you might consider taking out a safe, manageable, personal loan from OppLoans. OppLoans reports your on-time payments to the credit bureaus so you get the cash you need now and you can improve your credit score over time.
Read more about credit scores in our Financial Terms Glossary. You can also read more in the ebook Credit Workbook: The OppLoans Guide to Understanding Your Credit, Credit Report and Credit Score.
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