What Is My Credit Score And How To Estimate It?

By Author: Tina Roth
Total Articles: 3
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Finance management is an essential part of our lives and most everyone looks for a way to improve it. Some people are just born with the skills and others embrace reality by learning the knacks of finance management. And before we jump into “What is my Credit Score?” and other important questions, let’s understand what it really means.

The Definition!

The FICO Credit Score is a numerical expression that determines how well you handle your money and where you stand financially. In simple words, it’s a reflection of your overall financial wellbeing.

What is my Credit Score?

The FICO Credit Score is a key factor in your financial journey. It is a number which falls on a scale of 300 to 850. Higher your score, better it is. It is determined based on the details in your credit report which has your credit history, loan repayments, new credits etc. All these factors along with other key factors play a vital role in determining your credit score. This gives you the answer to “What is my credit score?” so let’s proceed into building your understanding of how to determine it and the factors involved.

Let’s ...
... get to the 4 important aspects of credit score. Now that you would have understood it by definition, let’s throw some light on how it is calculated.

#1. How Your Credit Score is calculated?

Here, we are referring to FICO score when we are talking about credit score. There are other credit scoring models available but among them, FICO is widely used. The three major giants in the industry: Experian, TransUnion, and Equifax calculate the FICO score in different ways and thus your score can slightly vary.

The actual formula to calculate the FICO score is a well-kept secret but knowing the factors involved to determine your credit score can help in understanding it better.

#2. Key Factors that determine your credit score:

“What is my credit score?”Let’s break your credit score into the associated key elements.
Your FICO Score is calculated based on the following five factors:

• Payment History

Your payment history accounts to 35% of your credit score. Your payment history is the first thing that any money lender would like to check. As it gives all the information whether you’ve paid all the credit accounts on time.

• Your debts and other amounts you owe

The amount you owe accounts to 30% of your credit score. It shows the debts you owe, your credit limit, loan balance etc.

• Length of your credit history

The length of your credit history accounts for 15% of your credit score. The longer you’ve established your credit account will reflect as a better score.

• Types of credits

The types of credit you hold/ held in the past accounts for 10% of your credit score. The different types of accounts you use such as credit card, mortgage, auto loan etc. is a factor that determines your creditworthiness. It simply shows that you are capable of handling multiple accounts responsibly.

• New credit

Your new credit accounts for 10% of your credit score. It focuses on the new inquiries and how many new credit accounts you hold. The lesser the better.

#3. Excellent, Good & Bad Credit Score:

What is my credit score- excellent, good or bad?
The FICO score ranges between 300-850 and most people maintain their scores between 500-850. It depends on the purpose you’re looking at such as for a loan or credit. If you’re planning to put an application for a major loan, then you need to maintain a score above 700 to get you the approval and best rates. Different lenders fix different cut-off points and on a general basis the scores are classified as:

• Below 580 – Poor
• 580 to 669 – Fair
• 670 to 739 – Good
• 740 to 799 – Very Good
• 800 & Above – Excellent

#4. How to Estimate your Credit Score?

You can’t estimate your credit score unless you check it. Your credit card provider might offer a free credit score (along with the credit report) with your monthly statement, but you might not know which scoring method would your lender use to calculate the score. To be on the safer side you can try calculating in all the 3 ways by using Equifax, Experian, and TransUnion.

There are lots of websites that you can use to estimate your credit score more accurately. All you need to do is enter a few sets of information and get your score in just minutes.

Summing up:

Checking your credit score can help you to know about your financial management and how your decisions impact your finances. Keep a check on the factors that influence your credit score to be on track. Here’s a link for “Check my credit score” online.

Visit: https://www.thefinancialstatement.com/