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What is credit score?

Updated: Dec 14, 2021

A credit score is a number between 300–850 that depicts a consumer's creditworthiness. The higher the score, the better a borrower looks to potential lenders. A credit score is based on credit history: number of open accounts, total levels of debt, and repayment history, and other factors. Lenders use credit scores to evaluate the probability that an individual will repay loans in a timely manner.



How Credit Scores Work

A credit score can significantly affect your financial life. It plays a key role in a lender's decision to offer you credit. People with credit scores below 640, for example, are generally considered to be subprime borrowers. Lending institutions often charge interest on subprime mortgages at a rate higher than a conventional mortgage in order to compensate themselves for carrying more risk. They may also require a shorter repayment term or a co-signer for borrowers with a low credit score.


Conversely, a credit score of 700 or above is generally considered good and may result in a borrower receiving a lower interest rate, which results in their paying less money in interest over the life of the loan. Scores greater than 800 are considered excellent. While every creditor defines its own ranges for credit scores, the average FICO score range is often used.


  • Excellent: 800 to 850

  • Very Good: 740 to 799

  • Good: 670 to 739

  • Fair: 580 to 669

  • Poor: 300 to 579

A person’s credit score may also determine the size of an initial deposit required to obtain a smartphone, cable service or utilities, or to rent an apartment. And lenders frequently review borrowers' scores, especially when deciding whether to change an interest rate or credit limit on a credit card.

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