What is a Credit Score?
A credit score is a three-digit number calculated to indicate your creditworthiness. The higher the score, the more creditworthy you are to a lender. A credit score is calculated from the information in your credit report and considers your on-time payments, the length of your payment history, your mix of different types of credit accounts, and other such factors. It is
important to know that your score does not take your age, income, employment, marital status, or your bank account balances into account. You can learn more about credit scores and scoring models from the Consumer Financial Consumer Financial Protection Bureau website: https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-score-en-315/
What is VantageScore®?
VantageScore® was founded by the 3 leading credit reporting agencies – Experian, Equifax, and TransUnion. This credit score model was developed by a representative team of statisticians, analysts, and credit data experts from each of the credit reporting companies, and is used by hundreds of institutions, including credit unions, banks, credit card issuers, and mortgage lenders. The VantageScore® 3.0, the score that is shown in SavvyMoney, is a newer and more popular version of VantageScore®. It is calculated on a scale of 300-850, with 300 being the lowest and 850 the highest score.
What Does a “Good” Credit Score Mean to Me?
A good score may mean you have easier access to more credit and lower interest rates. The consumer benefits of a good credit score go beyond the obvious. For example, underwriting processes that use credit scores allow consumers to obtain credit much more quickly than in the past.
What Factors Influence My Credit Score?
Five major categories make up a credit score:
- 40% is Payment History (Do you pay your bills on time?)
- 23% is Credit Utilization (How much debt do you have?)
- 21% is Account Age (The longer, the better.)
- 11% is Mix of Credit (You want to show you can handle a mix of loan types.)
- 5% is Recent Activity (Applying for credit recently.)
Why is understanding and improving your Credit Score so important?
- A good indicator of financial responsibility
- More likely to get approved for a loan
- It saves you interest over time
