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What’s in Your Credit Score

June 27, 2018

​Since most Americans carry some level of debt, most also have credit scores. Banks and credit card issuers use them to decide whether to extend us credit, but potential landlords, employers, and others are also increasingly checking them as a test of our trustworthiness. So, it’s worth knowing what a credit score is and what you can do to influence it for the better.

​The concept of a credit score is simple: it’s a number indicating how likely you are to pay your debts on time. There are multiple credit bureaus issuing scores and multiple kinds of scores.

​The most common is called FICO. There are 29 different kinds of FICO scores, ranging from general-purpose scores used by credit-card issuers to industry-specific scores for mortgage lenders, automotive lenders, etc. Before extending you credit, banks or businesses will check your score, usually with one of the three major credit bureaus, Experian, Trans Union, or Equifax. The score reflected in your MyIDCare dashboard is your TransUnion VantageScore.

​The formulas used to calculate credit scores are secret, but the factors typically include:

  • Your total outstanding debt (credit cards and loans) vs. your total available credit. This is called a “utilization ratio.”
  • Your history of making payments on time (or not).
  • Other factors such as the length of your credit history, how recently you’ve opened new lines of credit, types of credit, etc.

​General-purpose FICO scores range from 350 to 850. You want your score to be above 650, but higher scores may qualify you for better interest rates.

​It’s worth tracking your credit score because a sudden, large drop can be an indicator of identity theft. However, it’s not worth obsessing about small changes to your score because it will change slightly every time you get a monthly credit card statement or pay a bill.

​If you want to improve your credit score in order to get loans or better interest rates, the simplest strategy is probably what you’d expect: pay off your credit card balances monthly or keep your credit utilization low and pay your bills on time.

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