A credit score is defined as a number assigned to a person that third parties, such as lenders, will use to indicate the risk of lending money to that person. Banks, credit card agencies, and other institutions will use this score to assess if one will be able to pay off any debts that have accrued.
Your credit score can be impacted by many factors, which can help or hurt you when trying to open a credit card, purchase a house or car, or take out loans. Therefore maintaining a good credit score is very important.
A popular software by Fair Isaac Corporation is often used to generate your credit score, also referred to as your FICO Scrore. Some popular credit reporting agencies that offer your FICO score are: Equifax, Experian, and TransUnion.
The FICO Scale ranges between 300 and 850, with the higher score being better. The image below shows the FICO Score Scale. An 'excellent' score can fall anywhere between 800-850. On the other hand, a 'very bad' score will range between 599-300. Having a higher credit score shows that your financial behaviors demonstrate an ability to pay off debt; you can also expect to have the lowest interest rates and the best terms. On the other hand, having a very bad credit score can impact trying to make a credit purchase; typically only secured loans* will be approved.
Secured Loans* - loans that are backed by assets - 'if you do not pay the loans back, they can use a personal asset, such as a car or property, as the repayment of the loan')
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