Credit Score Range and Meaning
Author: Hector
Credit score range and meaning
The credit score plays an important part in the delivery of loan in the United States. Credit score is calculated by Experian, Equifax, and TransUnion, the three major credit bureaus in the U.S.. Credit score to predict the exact amount of risk a particular borrower. This has eased the process of lending to consumers in the U.S. candidate. When a good credit score, banks and credit card organizations reduce the interest rate, initial payment, and other costs. If the borrower is a high risk candidate, then all this will be substantially higher to reduce the losses that could arise from the risk of bad debt. Credit scoring system was first created in 1958 by FICO or Fair Isaac Corporation and it is followed in all loans current process effectively.
VantageScore
If you want to understand the range of credit scores and what it means, then you should familiarize yourself with the process of calculating credit scores. About 35% are allocated to the previous payment history of borrowers. Prompt payment will increase your credit score, while late payments or default would drastically reduce the credit score. 30% are obtained from the use of credit by actual prospective borrowers. Credit score can be improved by reducing existing debt, which will lower the utilization ratio. About 15% is allocated to the length of the borrower’s credit history for several years and the presence or absence of prompt payment. About 10% is about the type of credit used by the borrower. If the borrower has dealt with consumer finance, revolving credit and installment correctly, the credit score will be high enough. 10% end credits obtained from the records of new or recent search for credit. If the borrower has been looking for or applied for credit recently, this will lead to lower credit scores.
FICO credit score ranges between 300 and 850, while the VantageScore ranges between 501 and 990. The median score is considered 723. However, most financial institutions do not hesitate to lend if the credit score is between 650 and 799.