How to Improve Your Credit Score: Introduction

The good ole days of being able to obtain credit with a combination of your credit score, your character, and your personal affiliations are over. Your credit score is now the most important factor that lenders use to evaluate your credit worthiness.

What exactly is your credit score?

Your credit score is a three digit score calculated by the credit bureaus from your past credit history. The credit score was invented by a company called Fair Isaac as a way to predict your chances of credit failure using just your credit report. In recent years this system has gained popularity and now each of the three major credit bureaus, Equifax, Experian, and Transunion all use the Fair Isaac system to calculate their version of your credit score. When applying for credit today you are nothing but a "number" - your credit score.

What's considered a good credit score?

Your credit score can range from 200 to 850 with 200 being the worst score and 850 being the best score. Most lenders will usually give you home loans or car loans with a credit score of 500 and up. However, the "magic" score is considered to be 720. With a credit score of 720 you can obtain any type of credit such as nothing down home loans, no income verification loans (personal loans), home loans with an equity line of credit built in, etc. While a credit score of 720 is ideal, you can still obtain no income verification loans with a credit score of 620 or higher. Credit scores in this range can also give you the ability to obtain a home loan with a 5% to 10% down payment. It's important to note that most lenders look at your "middle score" when determining credit worthiness. Your middle score is the average score calculated from combining all three of your credit scores from each of the three major credit bureaus.

What exactly is a credit bureau?