What are credit scores? Understanding your credit score report is not always easy if you’ve never looked at your credit score before. Based on numbers alone, credit scores range from 300, which is the lowest score, to 850, which is the highest score. The national average is around 732. To qualify for the ideal loan rates, lenders usually require that you’ve a 750 rating credit score. Once you have your scores in hand, you’ll also notice there is a wealth of other information regarding your debts.
As of this year, there’s a new credit rating model known as “FICO 08.” The new model will be more forgiving of people who might have slipped on one payment but are otherwise in good standing. It also eliminates young students who wish to “piggyback” on their parents’ good credit by appearing as an authorized user on a credit card. Basically, if you’ve one major account in delinquency but you also have a number of other accounts in good standing, then your credit score will increase with the new model. However, if you’ve one major delinquent account and a poor payment history across the board, then your credit score will decline. FICO states a 20-30 point adjustment is likely this year for many borrowers who fall into these categories. Getting your free credit scores from Equifax, Experian and TransUnion is the first step toward developing a reasonable financial plan.
