Credit Scores
During this unit, you will learn that your credit score is a numerical rating of your credit-worthiness (how likely you are to pay off your debts), based on the information in credit reports from the three main credit bureaus in the United States. The most commonly used credit score is the FICO score. Banks and other lenders, use credit scores to evaluate whether or not someone qualifies for a loan. If qualified, the credit score also determines the interest rate and credit limit.
General rule for credit score ranges
300-619 – Bad
620-659 – Poor
660-699 – Fair
700-759 – Good
760-850 – Excellent
How is the score reported?
Only FICO and the credit bureaus know (Equifax, Experian, and TransUnion). But, we do know the %s of the different components that make up the credit score.
35% - Payment History
-Pay bills on time
-Always pay the min amount
-One late payment will have a negative impact
30% - Amounts Owed (two parts)
Part 1 - Total amount of money you owe lenders
-Bank loans, credit cards, utility bills, store cards, etc
-The less you owe, the better your score
Part 2 - % of available credit you are using
15% - Length of history
-The amount of time you’ve been using credit
10% - The amount of new credit you’ve applied for recently
10% - Types of credit used
Directions
After reading the above information, please explain your thoughts on using credit, building a good credit score, and how your actions effect your credit score. Responses should be detailed, grammatically correct, and a minimum of 150 words. Anything less will not be graded. Type your response in Microsoft Word and copy & paste to the response box below. You don't have to answer specific questions, but instead describe your thoughts in general about credit.
General rule for credit score ranges
300-619 – Bad
620-659 – Poor
660-699 – Fair
700-759 – Good
760-850 – Excellent
How is the score reported?
Only FICO and the credit bureaus know (Equifax, Experian, and TransUnion). But, we do know the %s of the different components that make up the credit score.
35% - Payment History
-Pay bills on time
-Always pay the min amount
-One late payment will have a negative impact
30% - Amounts Owed (two parts)
Part 1 - Total amount of money you owe lenders
-Bank loans, credit cards, utility bills, store cards, etc
-The less you owe, the better your score
Part 2 - % of available credit you are using
15% - Length of history
-The amount of time you’ve been using credit
10% - The amount of new credit you’ve applied for recently
10% - Types of credit used
Directions
After reading the above information, please explain your thoughts on using credit, building a good credit score, and how your actions effect your credit score. Responses should be detailed, grammatically correct, and a minimum of 150 words. Anything less will not be graded. Type your response in Microsoft Word and copy & paste to the response box below. You don't have to answer specific questions, but instead describe your thoughts in general about credit.