What’s in a Credit Score?

Do you know your credit score? If not, you might want to consider finding out. Your credit score tells lenders a lot about you and helps them to decide if they should extend you credit. Even more importantly, maybe you do know you credit score, but do you know what it means? Your credit can determine eligibility for private student loans and student credit cards – two things you may be in need of when you start college. Here is a quick breakdown of how credit scores work.

The Number
Credit scores can range from above 800 (which is outstanding) to the 300 range (not good at all). Most Americans have a credit score of in between 799 and 650. Only about 11 percent actually top the 800 mark and just a few percent drop below into the 300 range. In all, an average credit score is about 625.

Settling the Score
The credit score is derived from a formula. It is based on your credit report and what it relays regarding payment history (35 percent), current debt (30 percent), length of credit history (15 percent), types of credit (10 percent), and new credit (10 percent).

Tracking Scores
In the U.S. there are three major credit reporting agencies that track credit scores for the nation’s population. These agencies include Equifax, Experian, and TransUnion. Each agency collects and calculates its own information. Therefore, one person can have three credit scores. Usually a lender will pull all three scores and base their loan or credit approval on the average score.

Knowing and understanding your credit score is vital to financial success. It can also serve as a parachute when you find yourself in need of funds quick. You never know when you will need to apply for a student credit card or even a private student loan to help pay for college expenses. With a poor credit score, you might not qualify for this type of assistance.

Student Finance | private student loans and federal consolidation loans @ iStudent Loan