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Your credit score is one of the most important pieces of financial information about you. It is something that will fluctuate but will be with you forever. Where you fall on the credit score scale will determine a lot in your life. It also shows to others what you are like in managing your financial life. Lenders, and many others in your lifetime, will look at where you are on the credit score scale and treat you in respect to this. This is primarily financially wise and in money matters yet it can affect other areas of life as well. So don’t kid yourself the higher you are on that credit score scale the better place you are financially.
What is a credit score scale and how does it work?
When we think of credit scores we mostly think of the FICO score. This is put out by the Fair Isaac Corporation and the scores range from 300 to 850. You obviously do not want to be at 300, your goal is to get to 850 or as close as you can. The purpose of the credit score is for lenders and large corporations to see if you are a risk to them. The purpose of the credit score scale is to see how high or how little of a risk you are. This information will be used in some places like, banks, utility companies, cell phones, car places and more. Before they allow you to use their services and get credit they need to know your risk level. Basically they need to know what are the chances they are going to get their money back. Since you history in some financial areas determines this, they use this. As quite often history predicts the future.
How Credit Score Scale Is Determined
Now the right question here is, how do they come up with my position on the credit score scale? It’s actually quite simple and makes a lot of sense. They determine this based on the following information (yet not limited to):
- Payment history on loans and credit cards
- How much of your available credit you are using
- Length of your credit history
- Recent credit inquiries
- The types of debt/credit that you have.
Credit Score Does Matter
So the formula for determining this is quite simple. Yet from looking at this it is so important to pay your bills on time. Keep in mind that this credit score is scrutinized very closely by lenders and others using it to make a decision. Yet you work history and income plays a role as well. What is key to remember here is that you credit score does matter. What also matters is where on the credit score scale you fall is also very important. In order to be financially successful it’s important to stay at the higher end of the scale. You will be able to have more opportunities financially. So keep this in mind when you are first starting out in your financial life. What you do today will affect you down the road, good and bad.
Where to Get Your Credit Score
If you want a more complete look at your credit score, you will have to pay for it. The major credit bureaus offer packages that include credit scores and credit reports from all of the bureaus. This can cost between $40 and $70, depending on which products you purchase. You can, however, usually get just a score from one of the bureaus for between $7.95 and $10.95. You can also go to MyFICO.com and purchase your score. MyFICO offers the score from Fair Isaac Co. Most lenders use a formula based on the FICO score to create their own scores.
Other paid services include CreditReport.com or Equifax Score Power. These companies will give you a free trial initially, but then want to sin up to a monthly subscription. You can must get your score and cancel the service. Just don’t do it too often and familiarize yourself with the credit score scale.