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Interpreting Your Credit Score

Your credit score provides a good summary of how lenders will view your credit profile, however, it is only one of the factors that a lender may consider when you apply for a loan. Lenders may consider employment, income, expenses, assets and other factors when making credit decisions. Also, different lenders may weigh some of these factors more heavily than other lenders.
Lenders generally look at three areas:

  • Credit reputation: your credit score and history
  • Collateral: your loan amount relative to the home or auto value
  • Capacity to pay: your income, debt, cash reserves

As a result, a lender could prefer a lower score borrower with favorable factors over a higher score borrower with negative factors.
Credit scores generally range from the mid 300s to the mid 800s. The following table will give you a general idea of what your score tells lenders, but remember there are no set rules. Different products and lenders use different guidelines for what is an acceptable score. Also, there will usually be differences in the scores calculated by each of the three credit bureaus. Lenders will often use the middle of your three scores.

Above 730

Excellent credit

700 - 729

Good credit

670 - 699

Lender will take a closer look at your file

585 - 669

Higher risk; you will not be eligible for the best rates and products. Credit products may not be available.

Below 585

Credit options will be limited or not available. Lender will need to consider other information in your application.

What factors influence a credit score?

A credit score or credit bureau risk score is based on information drawn from your credit report. About 30 individual factors are used to determine the score. Certain factors, such as payment history, have more weight than others, such as the length of your credit history. However, a factor may be more important to your credit score than to someone else's score because of differences in individuals' credit reports. Also, each factor's importance can change as your credit report changes. Factors can be categorized in five areas:

Payment history. Payment information on credit cards, installment loans (such as a car loan), mortgage loans or finance company accounts. Are there public record items, such as judgments or bankruptcy, and collection items? Details on late or missed payments, including how much was owed, how late the payments were and how recently they occurred. How many accounts show no late payments. According to Fair Isaac, this category usually determines about 35% of your score.

Outstanding debt.
Amount owed on all accounts and on different types of accounts, such as credit cards or installment loans. How many accounts have balances? How close are you to each credit limit? According to Fair Isaac, this category usually determines about 30% of your score.

Credit history.
How long have you been building a credit history? How long specific accounts have been established and how long since you used each account? According to Fair Isaac, this category usually determines about 15% of your score.

Pursuit of new credit.
How many inquiries and new accounts does your report show, and how recent are they? How long has it been since the most recent inquiry? Whether you have made on-time payments to re-build your credit after a period of frequent late payments. According to Fair Isaac, this category usually determines about 10% of your score.

Types of credit in use.
How many accounts are reported for bank cards, travel and entertainment cards, department store cards, installment loans, and so on. According to Fair Isaac, this category usually determines about 10% of your score.
Also informative is the list of "reasons" that may be provided to account for why a score isn't higher. When lenders request your credit score, they also receive a list of the four most significant reasons your score is not higher. Although lenders do not have to tell you your score, they should share the reasons listed on the report with you.

The possible FICO reasons are:

  • Amount owed on accounts is too high.
  • Delinquency on accounts.
  • Too few bank revolving accounts.
  • Too many bank or national revolving accounts.
  • Too many accounts with balances.
  • Consumer finance accounts.
  • Account payment history too new to rate.
  • Too many recent inquiries in the last 12 months.
  • Too many accounts opened in the last 12 months.
  • Proportion of balances to credit limits is too high on revolving accounts.
  • Amount owed on revolving accounts is too high.
  • Length of revolving credit history is too short.
  • Time since delinquency is too recent or unknown.
  • Length of credit history is too short.
  • Lack of recent bank revolving information.
  • Lack of recent revolving account information.
  • No recent non-mortgage balance information.
  • Number of accounts with delinquency.
  • Too few accounts currently paid as agreed.
  • Time since derogatory public record or collection.
  • Amount past due on accounts.
  • Serious delinquency, derogatory public record, or collection.
  • Too many bank or national revolving accounts with balances.
  • No recent revolving balances.
  • Proportion of loan balances to loan amounts is too high.
  • Lack of recent installment loan information.
  • Date of last inquiry too recent.
  • Time since most recent account opening too short.
  • Number of revolving accounts.
  • Number of bank revolving or other revolving accounts.
  • Number of established accounts.
  • No recent bankcard balances.
  • Too few accounts with recent payment information.

Keep in mind that your credit report changes day to day as you make payments or increase balances. If you pay off your credit cards in full every month but your credit score is compiled before your payments are reported to the credit bureau, your score will reflect those balances. Generally, the total balance on your last statement is the amount shown on your credit report.


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