Your Credit Score

About Your Credit Score

Your credit score is a numerical measure lenders use to determine how much risk they are taking by lending you money. Credit Scores generally range between 300 - 850. You have three credit scores from companies generally called the Credit Bureaus: Equifax, Experian, and TransUnion.

Each score is based on information these credit bureaus keep on file associated with your accounts. The higher your credit score is, the lower the risk your loan will be assigned by the bank. Lower risk generally equals lower interest rates. So, if you want to get the lowest interest rate, keep your credit score high.

What Determines Your Credit Score

Your credit scores are determined by mathematical formulas which are kept secret by the credit bureaus. However, they have provided general guidance so consumers can better understand the makeup of their scores. Basically, your credit score is determined by:

  • 35% Payment History: Having a long history of making all payments on time is the single largest factor in determining your credit score.

  • 30% Amount Owed: Keeping the amount you owe as a percentage of your total available credit low demonstrates an ability to manage your money effectively. "Maxing" out credit cards and other accounts is a strong indicator that you will stop making payments.

  • 15% Length of Credit History: Having a long history of good credit is helpful for your score. Your score considers the oldest account on record as well as the average age of your other open accounts.

  • 10% New Credit: Just as having a long history of making your payments on time will raise your credit score, having one or more new accounts with little to no history of on-time payments can hurt your credit score. Additionally, because having your credit score "pulled" before getting a loan is an indicator you are considering taking out a loan, these "inquiries" generally cause your credit score to go down.

  • 10% Types of Credit in Use: Your mix of revolving credit (think credit cards), installment loans (think fixed payment loans like a car loan), and mortgage loans impacts your credit score.

What is Your Credit Score

Knowing your credit score is important. Your credit score not only influences your ability to borrow money at the best rates, but it also influences many other things such as: your insurance premiums, amount of credit you are allowed on credit cards, your ability to get a job, your ability to find a home to rent, etc.

There are a number of places on the web you can either find out or estimate your credit history and score. A few of these include:

  • This website was set up to allow borrowers annual access to their credit report. This report does not include your scores. Rather, it is meant to show consumers each of their reported accounts and the information associated with them so they can know what information is on file and request corrections if necessary.

  • This website was launched by Fair Isaac Company in January of 2011 with the purpose of educating consumers on their credit score. Information on the site is comprehensive and relatively simple to understand.

  • This website will allow you to estimate your credit score within a few points based on account information. While it is not perfectly accurate, it can give a borrower a good understanding of where their credit stands and what they can do to improve their score(s).

  • This website is operated by Equifax and offers subscription services which allow consumers to get access to or monitor their credit reports and score. Generally, their subscriptions offer a free trial period where you can see your score(s) and report(s) for free.

Comparing Your Credit Score

After you understand where your credit score is, it's important to know what that means and what group you fit into along the credit spectrum. Here are the general groupings used by most financial institutions:

  • Excellent 740+: If your credit falls in this range you will likely be able to qualify for the very best interest rates and loan programs. Your credit may have one or two minor blemishes in the past, but overall you pay everything on time and your accounts are in very good standing.

  • Good 700-739: Having a credit score in this range will still generally allow you to qualify for good interest rates. People who fall into this grouping either have a few past missed payments or don't have very much credit history. 58% of Americans have a credit score of 700 or greater.

  • OK 680-699: If you have a credit score in this range you will likely be able to qualify for most loan programs. However, your interest rate will not be the best available.

  • Sub-Prime 620-679: If your credit score falls into this range, lenders start becoming concerned about your willingness and ability to pay back the loans you have been given because you are likely to have either very little credit history or a history of missing a significant number of payments. If you qualify for a loan, it is likely that your interest rate will be much higher.

  • Poor 350-619: Having a credit score in this range will most likely result in you not being able to get a loan. You either have no credit history or have missed multiple payments in the past and are likely not current on your outstanding obligations.

Raising Your Credit Score

There is no silver bullet to raising your credit score immediately. As described in "About Your Credit Score" above, your score(s) are primarily determined by 5 different things. While there are sometimes things you can do to get your score(s) up quickly, the best bet is to follow advice focused on creating long-term value. Some of these things include:

  • Dispute Incorrect Information: If you notice errors on your credit history, contact the credit bureaus directly and notify them of the errors. They are under federal mandate to timely remove incorrect information.

  • Make Your Payments On-time: This is the single best thing a person can do to influence their credit score positively.

  • Avoid "Maxing Out" Your Credit: While emergencies sometimes come up, do everything possible not to max out your available credit. A commonly accepted standard is that it is best not to have more than 40% of your available credit outstanding at any given time.

  • Establish a Long History: Even if you don't need it, it is a good idea to keep a 2-3 accounts open and active. Doing this establishes a history of managing and paying your bills over an extended period of time. It shows you are reliable.

  • Ask for Help: Navigating the Credit Bureaus can be very daunting. While it is true consumers can dispute information on their own, many others prefer to hire someone to assist them. Companies such as Nitro Credit offer many services that can help consumers navigate the process more effectively.

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Jammony believes the mortgage industry and loan origination processes are fundamentally broken - causing unnecessary headache and heartache for millions of borrowers every year. Jammony's vision is to change the industry by doing three things. First, Jammony is committed to providing borrowers with tools and technology which allow them to learn about, shop for, and compare mortgage quotes online in a non-threatening environment. Second, after choosing the quote which best meets their needs, Jammony performs an audit of the loan disclosures and final documents to ensure that what was expected is what is delivered. Lastly, Jammony works diligently to ensure their services never conflict with the best interests of their customers.