It is important to make yourself aware of the credit score ranges, how the calculations are made and what is taken to be a good credit score. This is because your credit score will influence any financial decision you make. One of the most frequently used scales is the FICO credit score scale, a three-digit number ranging from 300 to 850. The credit rating improves as the numbers increase.
The safest range to be if you want to be given first consideration for financial assistance is at 720 to 850. In case you are below the range of 600, then you risk lacking financial assistance. When rated using the FICO credit score scale, one with a rating of 722 acquires the same interest rate as one with a rating of 848.
Major components used in calculating the score
Your payment history, which includes the much you have in form of overdue payments and how much they amount to, is the major consideration. They also consider if there were any issues in making the payments will also influence the rating.
Another factor considered while placing you in the credit score scale is the sum of debts you have in form of accounts, this could be mortgage or installment and the number of credit lines used. Holding credit cards that lack any balance will help in rating you better. The length of time that you have been a debtor and the account you hold.
The types of credits that you have also mean a lot. If you have been using the risky types, then you are rated lower as compared to those with mortgages. The credit institution will also conduct a follow up to check on your loan repayment. The number of recently opened credit accounts and any increases on the credit limits. Your rating will be lowered if you are holding several credit accounts. This is because it may be difficult if not impossible for you to afford an additional loan.