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What is a credit score?
FICO score
A FICO score, also known as a credit score, is a scoring system which is used to determine a person’s credit score number. A credit score can range anywhere from 300-850, with 300 being the lowest and a poor credit score, and 850 being the highest and a great score. It is common for most people to have a credit score in the range of 600-700.
Is my credit score good?
To determine if a person has a good credit score, he can obtain a free credit report from the three national credit reporting agencies (also known as the credit bureaus). The credit report will show their credit score.
Financially stable
Most lenders will consider a credit score of 700 or higher as a good score, and a sign of financial stability.
High credit risk
Many lenders view a credit score of 600 or lower to be a high credit risk person. This causes most lenders to charge higher interest rates or to reject such credit applications.
Why does a credit score matter?
Better lending opportunity
A score should is important for anyone who is looking to purchase a home, rent an apartment, buy a car, or even obtain a new credit card with a lower interest rates. Lenders look at credit scores all of the time, and it helps them to make financial decisions regarding the borrower.
If a lender knows that the borrower has a good credit score, the lender will be more likely to give a higher credit limit or offer lower interest rates on a credit card. Moreover, he may even send more credit card offers to this person.
Less rejection
With a good credit score, a person will less likely face a rejection. If a person with a bad credit score tries to rent a house, his application may be rejected, or he may be required to pay a bigger security deposit.