What Credit Score Rankings Mean

Having This Knowledge Can Help You Keep A High Credit Score

Credit score rankings are also called credit scores, credit score ratings, and credit score scale. A credit report, on the other hand, is a document containing quite a bit of information on an individual, with the credit scorebeing a number on a scale included in the report.

The FICO System
Most credit bureaus in the United States use the FICO system to rate an individual. This abbreviation is derived from software developed by Fair Isaac & Company, and explains why the term FICO score is often used in place of credit score.

The Vantage Score
This is a new score introduced by the three national credit reporting agencies to try and standardize credit scores. They range from 501 to 990 points, with letters from A to F assigned to different ranges of scores, like this...

A -- 901-990
B -- 801-900
C -- 701-800
D -- 601-700
F -- 501-600

There is also the Plus Score introduced by Experian and the CreditXpert developed by CreditXpert, but they are along the same lines as the FICO system.

Credit Bureaus
While we're on the subject of credit score rankings, let's pause for a moment and define credit bureaus, and exactly what they do. First of all we need to shatter a myth. Credit bureaus are not Government agencies.They are private agencies in business to make a profit just like any other business, and they're strictly regulated by the Government.

What they do is collect a vast amount of information on an individual, actually millions of individuals, and sell that information to employers,lending institutions, landlords, etc. Below is some of the information they collect on us in order to generate a credit report, along with credit score rankings.

• How you pay your bills
• When you change jobs
• When you move
• If you filed for bankruptcy
• If your home was foreclosed
• If you have had dealings with a collection agency
• Number of credit cards
• Amount owing
• Types of loans
• Length of credit history
• Number of credit inquiries
• If you have been sued

The Five Main Categories
Although credit bureaus do collect a lot of information on a person, they mainly use the list below to generate a report. Also shown is how much weight each item contributes to the total score.

* Payment history: 35% * Amounts owed on accounts: 30% * Length of credit history: 15% * Types of credit used:10%

* New credit inquiries: 10%

For some people, a particular item may carry more weight than for someone else with a different credit history.

For example, if a person has gone through a home foreclosure in the recent past, late payment of bills would be considered more serious than for a person with a good credit history.

Actually, if you have a good credit history, one or two late payments won't affect your credit score.

Factors In Granting Credit
Lenders look at a lot of different factors when making a decision whether or not to extend credit. Factors such as:

• Your income
• Job history
• How long at present address
• Liens or judgements against you
• Bankruptcies
• Home foreclosures
• Type of credit requested

New Credit Inquiries
When credit bureaus count the number of new inquiries, they don't count:

• Inquiries you make yourself



• Those made by employers



• Queries from lenders regarding a pre-approved credit offer



• Inquiries from lenders just to review a customer account

A Good Credit Score Ranking
760 and above is considered a very good credit score, and you will get the best credit rates. If you think of it as a report card, it would be an A, above 700 a B, and between 600 and 700 a C. Below 600 is poor and you will most likely have to pay higher interest rates.

Overdue payments can seriously affect your score. If the overdue payments are recent, they will affect your score more than ones in the past. Unfortunately, paying off a collection account will not remove it from your report - it will stay there for 7 years. You should nevertheless try to get current as soon as possible.

Maintaining A Good Credit Rating
The single most important thing you can do to keep a high rating is to pay your bills on time. It's an easy thing to say, but not always easy to do. If you're having difficulty, contact your lender. Something usually can be worked out, and you will keep your good credit score.