Credit Score How Credit Works

What is a Credit Score?

Those who have a score above 700 are considered to have “Excellent” or “Prime” credit. As a result, those with the top credit scores will receive the most competitive rates on home mortgages, car loans, and credit cards. Although scores above 600 are still considered “Good” credit, their rates might be slightly higher than those with “Excellent” credit. Anyone with a score below 600 are considered to have “subprime” credit, meaning they are at a higher risk of paying high interest rates or getting declined for credit altogether.

Why is my “free credit score” lower than my regular credit score?

As a service to their account holders, some credit card providers may often offer “free” credit scores to their customers as part of their benefits. However, these credit scores are often measured on a different scale than the credit scores that decisions are based on.

Instead of traditional FICO scores, many “free” scores are based on the VantageScore 3.0 model. While the VantageScore model uses the same score range (300-850), the major difference is that VantageScore primarily focuses on the past two years of activity. Because of this, many report their “free” credit score is lower than their actual FICO score. Instead of being alarmed, smart consumers should read their VantageScore with the understanding that it considers a smaller data set than the FICO model.

How can I improve my credit score?

The best news about credit scores is that they can constantly be improved over time, so long as consumer realize how their scores are affected. The first major step everyone can take is to pay down balances as quick as possible. By having more available credit, credit profiles become stronger, causing scores to go up.

Other credit score improving techniques are a matter of time. Consumers who do not apply for additional lines of credit and allow negative items to drop over time will have less marks on their credit, allowing their score to rise naturally. Those who want to improve their credit may want to consider monitoring their credit through one of their credit card accounts or signing up for credit monitoring elsewhere.

Although they can be confusing at first, understanding what goes into a credit score can be a simpler process over time. Through knowledge, every consumer can improve their standing and watch their credit extend much further than ever before.

Have any questions about what your credit score is or how it’s calculated? Post them below!

About the author

Joe Cortez

Joe Cortez

Joe Cortez is an award-winning journalist focused on credit and personal finance management. His content has been featured by CNN, The New York Post, The Sun, and USA Today, and has been quoted as an expert by The Street, Bravo TV, and The Weather Channel. In his spare time, he can be found traveling the world on points and miles. For more, follow him on Facebook and Twitter.

1 Comment

  • My question deals with a bankruptcy. Three of the banks continue to report 30-90 day past due payments even though the bankruptcy was discharged over two years ago and they have zeroed my balance. Those late payments still show up even though they are no longer being used. Is that fair?

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