When you apply for credit, one of the first things a lender will check is your credit score. If you know what your credit score is before you apply, you’ll have a better idea of what to expect in the loan process.

What exactly IS a credit score?

A credit score is simply a number calculated by the three major credit bureaus that indicates how well you handle credit. This is done by reviewing your past credit history and looking at how you are doing with any current debts as well.

The three major credit bureaus are Experian, Equifax, and Trans Union. Each one has it’s own method of deciding what your credit score is. Then they use a scoring system to show how good you are at handling credit and paying your bills on time. They all use the same scoring system - FICO - which is an acronym for Fair Isaac Corporation. That’s why many people will use the terms “credit score” and “FICO score” interchangeably.

Don’t be surprised if your lender just gets a credit score from one credit bureau, instead of all three. This is not uncommon. Since all three bureaus follow the same scoring system, they will likely be giving very similar scores. For example, if Experian gives you a score of 710, Equifax and Trans Union scores should be in the same range. Of course, sometimes one credit bureau may have bad info. Mistakes happen, which is why you should review your credit report annually with all 3 credit bureaus. If there is a mistake, take the appropriate steps to fix it as soon as possible.

Where Do You Fall - What Is A Good Credit Score?

Your credit score can range from 375 to 900 points. The higher the number, the better you are. Getting credit will be easier, and you’ll likely get better loan terms as well.

You should understand that each lender will have their own underwriting guidelines and cutoff points they have to follow. But here is a general guideline you can use to see where your credit score falls overall.

If your credit score is 650 and above, this usually indicates very good credit history. This means you will probably find getting credit approval is quick and easy. Another bonus for having very good credit is that the terms of your loan will likely be very good, too.

“Average” credit tends to fall somewhere between 620 and 650. This is considered basically good, but you may find lenders need a little more documentation or explanation before they approve your loan. They tend to be a bit more careful, looking for any possible credit risks before they approve a large loan or high credit limit.

You may also find that your loan will take longer to finalize. Even so, chances are good that you are able to get approval at a good credit rate.

A score below 620 doesn’t automatically mean you won’t get credit. But you may need to shop around a bit to find the right lender. You should also understand that the interest rates and terms of your loans won’t be as desirable.

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