Intro to Credit Report Rating Criteria

It is important that you understand credit report rating criteria. Knowing the criteria that makes up your credit score will guide you on the right path to repairing your credit if need be.

It will also prepare you in the event you want to apply for a home or car loan or even to get lower-interest credit cards. Why is it so important to know this?  

The reason is because this is what banks and lending institutions used to decide if they are going to offer you financing. This determination is based on your credit report rating which is determined based on a variety of factors:

• 35% is based on payment history

• 30% is based on debt/income ratio

• 15% is based on length of credit

• 10% is based on types of credit

• 10% is based on number of credit inquiries

The above determinations are based on the FICO numerical scoring standards. The interpretation of your credit report rating is as follows:

• A FICO numerical score of below 620 means you have fair to poor credit.

• A FICO numerical score of 620 to 690 means you have good to very good credit.

• A FICO numerical score of 691 to 720 is very good to excellent

Also note that a credit report rating of about 650 is average. You may still be able to get some good deals when shopping for low-interest loans. However, it may not be as easy as if your credit was say 690 or higher.

However, if your credit score is too low you could miss out. You will need to take out high-interest unsecured and secured loans and you may need to get prepaid cell phone service.

You may also have to make large deposits any time you want to make major purchases for which you would pay in time. Furthermore, you may not get the apartment you want if your FICO numerical calculation is too low.

Additional factors affect your overall credit report rating:

• Level of usage of your credit

• Number of new inquiries you make

• Length of credit history and/or credit accounts

• Whether your bills are “paid in full” or “settled in full”

• Whether or not you have filed for bankruptcy

This is a very complex matter. Therefore, you should keep reading and understanding all aspects of your credit report rating. It will help you prepare for a brighter future.