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How The Credit Score Rating Scale Works

Jan 22, 2008
If you've ever received a credit report or checked your credit score, you may have wondered how they arrive at the number. There are a bunch of ratings that all have a different meaning. But if you want to fully understand your credit report, you'll need to understand the rating scale used.

There are several things that companies will review when building your credit score, including the following:

- How you've made your payments in the past

- Do you pay your bills by the due date?

- How much debt you have outstanding

- The length of your credit history

If you have a great deal of debt or you don't have a very long credit history, you will receive a lower credit score even if there are no "black marks" against you.

Recent credit applications also factor into your score. If you have made too many applications recently, this will cause you to receive a lower score. As will too much debt at high interest rates, such as high rate credit cards.

Generally, a score of 700 or higher is considered good. If your score is in this range you shouldn't have any trouble getting credit and you should receive the best interest rate possible.

A credit score of between 450 and 650 could stand some improvement. You'll have a harder time finding a loan or qualifying for a new credit card application. You'll usually require some kind of security as collateral. You'll also usually pay a higher interest rate because of the perceived risk to the lender.

A credit score of less than 450 needs some serious work. You likely won't qualify for credit at all at this level.

If your credit score is needing some help, there are quite a few place to get it. There are many credit counseling services out there that are free to use. They'll help you assess your situation and offer advice as to how you should improve it.
About the Author
Are you tired of struggling to keep up with your credit card payment? Learn some simple debt consolidation secrets on the Debtopedia website. Visit http://www.debtopedia.com for a free copy of my "Secrets Of Credit Card Debt" report.
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