What Is a Credit Score?

Welcome to the world of credit scores, where numbers rule and your financial reputation is on the line.

But don't worry, we will help you understand this often confusing and intimidating topic.

First things first: what is a credit score?

Simply put, it's a three-digit number that reflects the likelihood that you will pay your debts on time. It ranges from 300 to 850, with higher scores indicating a lower risk to lenders.

Now, you may be wondering how this magical number is calculated.

Well, it all comes down to five key factors: payment history, credit utilization, length of credit history, credit mix, and new credit. Let’s break each of these down:

  1. Payment history: This accounts for about 35% of your credit score and looks at whether you pay your bills on time. Missed or late payments can seriously damage your score.

  2. Credit utilization: This refers to how much of your available credit you are using at any given time, and it makes up about 30% of your credit score. Using a large portion of your available credit can be seen as a red flag to lenders.

  3. Length of credit history: The longer you have a credit history, the better, as it shows lenders that you have a track record of managing credit responsibly. This makes up about 15% of your credit score.

  4. Credit mix: Having a diverse mix of credit, such as a mortgage, car loan, and credit card, can show lenders that you can handle different types of credit responsibly. This accounts for about 10% of your credit score.

  5. New credit: Opening up several new credit accounts in a short period of time can be seen as risky behavior to lenders. This makes up about 10% of your credit score.

Now that you know the basics of how a credit score is calculated, you may be asking yourself why it even matters? 

A good credit score can mean the difference between being approved or denied for a loan, and it can also affect the interest rates you are offered. A higher credit score can save you thousands of dollars in the long run.

So, to sum it up, a credit score is a reflection of your financial responsibility and is determined by factors such as payment history, credit utilization, length of credit history, credit mix, and new credit. 

At National Best Credit Solutions, our team of credit experts will monitor your credit and we will do everything we can to help you maintain a healthy one. 

Schedule your free credit analysis today! Trust me, your wallet (and your stress levels) will thank you.

At National Best Credit Solutions, our team of credit experts will monitor your credit and we will do everything we can to help you maintain a healthy one. 

Schedule your free credit analysis today! Trust me, your wallet (and your stress levels) will thank you.

Schedule Free Credit Consultation