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Between 700 and 850 – Very good or excellent credit score.
Between 680 and 699 – Good credit score.
Between 620 and 679 – Average or OK score.
Between 580 and 619 – Low credit score.
Between 500 and 579 – Poor credit score.
Between 300 and 499 – Bad credit score
How this affects your life
The biggest effect your credit score will have on your life is in the interest rates you will be charged on any money you borrow. As you might guess, the lower your credit score the higher the interest rate will be on that car loan, personal loan, credit card or mortgage. Your credit score can also have an effect on the cost of your automobile insurance and your employability. This is because most employers today check applicants’ credit scores.
Credit card debts and your credit score
Credit scores are based on a formula developed by the company FICO, which used to be called the Fair Isaac Corporation. While each of the three credit reporting bureaus have their own versions of this formula, it generally divides as follows:
35% - Payment history (have you made late payments on your mortgage, credit cards, etc.?)
30% - Credit utilization (The ratio of current revolving debt to the total available of revolving credit or credit limit)
15% - Length of credit history
10% - Types of credit used (revolving, mortgage, consumer credit, etc.)
10% - Recent searches for credit
The two biggest factors
As you can see, the two biggest factors that make up your credit score are your payment history and credit utilization. In terms of credit utilization, the rule of thumb is that the more credit you are using vs. the amount of credit you have available, the more adversely your credit score will be affected. For example, if you have available $50,000 in credit card debt and are using only $5,000 of it, your credit score will be much better than if you were using $35,000 of it.
How to get your credit score
If you don’t know your credit score, you need to learn it. As you can see credit card debts have a serious effect on your credit score and your credit score has a serious effect on your life. While you can’t exactly get your credit score free, you can go to www.myfico.com and get it at not cost by signing up for a trial subscription to the company’s Score Watch program. It’s also possible to get your credit score from the three credit reporting bureaus but none of them will be the same as your FICO score.