What exactly is a credit score?

Posted by Mords1944 on May 9th, 2020

When you apply for a loan to buy your dream home or car, lenders will look at your credit score and use it to decide whether or not to give you the loan.

There are many Americans who do not know what a credit score is or how it is calculated. If you belong to this group of people, don't worry because in this article you will learn all these basic concepts that are necessary to start improving yours and buy the house or car of your dreams once and for all!

What exactly is a credit score?

A credit score is a 3-digit number that lenders use as an indicator of your ability to meet financial obligations such as mortgage payments, car payments, credit card bills, loan repayments, etc. Basically it tells lenders how likely you are to pay off your debts

Usually it's a number between 300 and 850. The higher the credit score, the less risky it will be for lenders. And the less risky it is for lenders, the better interest rates you'll get. Also, the higher your credit score, the better chance you have of getting a loan. Sounds simple right?

A score of 750 or above will give you the best interest rates and the best chance of being approved for a loan. On the other hand, with a value of 600 or less, you will have a hard time finding a lender who is willing to give you a loan. And if you find it, you will have to pay a lot of money in interest just for that low score.

This is why you should improve your credit score as soon as possible (whether you have a low score or not):

To avoid high interest rates.
To save thousands of dollars in long-term interest.
And to get the house or car of your dreams at the lowest possible cost.
Where does it come from?

Now you're probably wondering "Where does my Shop SImplio credit score come from?" This is a very common question and the answer is simple: Your credit score comes from your credit report.

This credit report is created by the top three credit bureaus in the states and contains the history of your payments, the amount of loans you have, how much you owe, and a few other things.

Offices use the information on your credit report to calculate your score. The three main credit agencies use the FICO rating system, which ranges from 300 to 850.