What does Credit Score mean?

by | Aug 7, 2020 | Finance | 0 comments

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To understand the credit score’s meaning, we first need to understand that a credit score is basically a number. This number usually ranges from 300 to 850. Credit score has a direct impact on your financial life because the lenders look at your credit score to decide whether or not to offer you credit.

Every business person or company has its own credit score. This credit score is calculated using a couple of variables. These variables include the total number of credit accounts you hold, overall debt levels, your payment history and the amounts stored in those accounts of yours. Hence, you can say that your credit score somewhat determines your borrowing future.

Why exactly is a credit score so important?

Your credit score is pretty important because the interest rate you pay to your lender usually depends upon your credit score. Therefore, lenders will first look at your credit score and decide whether to give you credit. Not only that, if you apply for a loan your credit score will also play a vital role there. It can directly affect your lending in terms of it being approved or declined.

In a nutshell, your credit score determines the interest you pay on loans and decides if your credit request will be approved or declined.

What does my credit score mean?

Your credit score is a number calculated based on the information gathered from your credit report. The higher this score is, the better is your chance of being approved for a loan or credit or even a mortgage at a reasonable rate..

Before a lender decides to offer you credit, they will usually look at the following information: such as your borrowing history, public court records, and linked financial data. Credit reference agencies in the UK, such as Experian, TransUnion, and Equifax, have credit scales that you can use to check where you sit (ranging from poor to excellent) on that particular scale.

If you would like to find out more about a credit score of you or another business, you could use the help of DataGardener and discover your credit score in no time. Based on that, you can manage your overall finances or even take measures to boost your success rates of loan or credit approvals.

What does an excellent credit score mean?

The most prominent credit reference agencies in the UK usually use five different categories for keeping a scale to credit scores. This numerical scale ranges from poor to excellent. These categories are categorically inferior, inadequate, fair, reasonable and excellent. The table below will give you a clear idea about what an excellent credit score looks like.

Credit score range

 TransUnionExperianEquifax
Excellent628-710961-999466-700
Fair604-627881-960420-465
Good566-603721-880380-419

If you have an excellent credit score, it will be effortless for you to borrow money and apply it for credit cards and loans. An excellent credit score will enable you to get the best interest rates and abundant credit card limits.

What does it mean when your credit score is 0?

If your credit score is zero, then it means that you have not established Credit scores, you don’t have a credit account and you have no credit history. It means you need to start your credit account. Having a zero credit score implies that you did not yet prove your ability to borrow and paying off loans.

Types of credit score

There are two main types of credit scores, such as the VantageScore and FICO (Fair Isaac Comparison) Score. These two types of credit score models are used for determining how well you are able to pay off your debts.

The FICO score ranges from 300 to 850, and it is the most common and best-known credit score. To calculate your FICO credit score, the factors involved are payment history, length of credit history, amounts owed, credit mix and new credit.

The three credit bureaus (Experian, TransUnion, and Equifax) also created VantageScore. To calculate this score, the factors considered are payment history, credit mix, experience, credit usage, available credit, existing balances and age of credit history.

What your credit score means

999 credit score ExcellentYou have the maximum or highest credit score and your credit or loan request is most likely to be approved and you will get the best interest rates.
726 credit score FairYou will be offered fair rates. However, the credit limit you get might not be abundant.
677 Credit score PoorYou might get high-interest rates even if accepted for credit cards or loans.
784 Credit score FairYou will be offered fair interest rates.
741 Credit score FairYou have a fair chance of credit offers with nice rates.
673 Credit score PoorYou might have to give high-interest rates.
620 Credit score PoorIt will affect your chances of getting good credit offers.
634 Credit score PoorYou have to pay high-interest rates.
562 Credit score PoorMight be rejected from the offer.
718 Credit score PoorYou have a fair score with moderate credit limits.
772 Credit score FairYou will be accepted for credit offers.
807 Credit score FairYour application will be accepted with good credit limits and rates.
822 Credit score FairMost likely to be offered the best rates and generous credit limits.
626 Credit score PoorMay have to pay high rates if the application is approved.
702 Credit score PoorYou will pay high-interest rates.
718 Credit score PoorModerate interest rates.
772 Credit score FairModerate credit limits.
562 Credit score PoorLow chances of acceptance by lenders.
807 Credit score FairYou will get a reasonable deal.
626 Credit score PoorYour interest rates may not be your favorite.
702 Credit scorePoorYour application will be accepted and you will be given a moderate offer.
822 Credit score FairIt’s likely you will get a reasonable offer.
611 Credit score PoorEven if your request is accepted, credit limits and interest rates will not be very generous.
500 Credit scoreVery poorYour application will be rejected.
300 Credit score Very poorThe application will be rejected.
520 Credit score Very poorYou have a very poor credit rating and your credit card application might be rejected.
850 Credit score FairLenders might be willing to offer you credit.
750 Credit score FairYou will get reasonable interest rates from lenders.
657 Credit score PoorMight be accepted but may have to pay high rates of interest.
601 Credit score PoorMight not be accepted for credit cards.

Conclusion

Your credit score will ultimately determine the amount of interest you will have to pay on loans. Not only that, but your credit score will also decide if your credit request will be approved or declined by lenders. In a nutshell, lenders are going to check your credit score to assess your reliability in terms of borrowing and repaying debts. If you would like to know how to get credit score, you can take the help of DataGardener and discover your credit score in no time. Based on that, you can manage your overall finances or even take measures to boost your success rates of loan or credit approvals.

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