Credit Scores

Interpreting Your Credit Score 

A credit score, a numeric summary of your credit history, generally ranges between 300 and 850. But what does the number mean to you?

What’s a good score?  There is no single “cutoff” score used by all lenders, and there are many additional factors besides your credit score that lenders use to determine whether to give you credit and at what interest rate. So it’s hard to say what a good score is outside of a particular lending situation. For example, one auto lender may offer lower interest rates to people with scores above, say, 680; another lender may use 720, and so on. Talk to your Wells Fargo loan officer for guidance.

How others score

According to Fair Isaac Corporation (FICO), this is how FICO® scores are typically spread among the population:

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Why your score isn’t higher

When a lender receives your FICO score, up to four “score reason codes” are also delivered. If the lender rejects your request for credit, and your FICO score was part of the reason, these score reasons can help the lender tell you why your score wasn’t higher.

These score reasons are more useful than the score itself in helping you determine whether your credit report might contain errors, and how you might improve your score over time. However, if you already have a high score (for example, in the mid-700s or higher) some of the reasons may not be very helpful, as they may be marginal factors related to length of credit history, new credit, and types of credit in use.

Top ten score reasons These are the top 10 most frequently given score reasons. Note that the specific wording given by your lender may be different from this.

  1. Serious delinquency.
  2. Serious delinquency, and public record or collection filed.
  3. Derogatory public record or collection filed.
  4. Time since delinquency is too recent or unknown.
  5. Level of delinquency on accounts.
  6. Number of accounts with delinquency.
  7. Amount owed on accounts.
  8. Proportion of balances to credit limits on revolving accounts is too high.
  9. Length of time accounts have been established.
  10. Too many accounts with balances.

How to calculate your credit score 

Your credit score is one of the most important measures of your creditworthiness. For your FICO® score, it’s based on metrics developed by Fair Isaac Corporation. The higher your score is, the less risky you are to lenders. Fortunately, by understanding what impacts your credit score, you can take steps to improve it. Your credit score is based on the following five factors:

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Your payment history accounts for 35% of your score. This shows whether you make payments on time, how often you miss payments, how many days past the due date you pay your bills, and how recently payments have been missed. The higher your proportion of on-time payments, the higher your score will be. Every time you miss a payment, you risk losing points.

How much you owe on loans and credit cards makes up 30% of your score. This is based on the entire amount you owe, the number and types of accounts you have, and the proportion of money owed compared to how much credit you have available. High balances and maxed-out credit cards will lower your credit score, but smaller balances can raise it – if you pay on time. New loans with little payment history may drop your score temporarily, but loans that are closer to being paid off can increase it because they show a successful payment history.

If you have any questions please email me. More importantly, if you want to know more about your credit scores or details of your credit report, get pre-approved online now by clicking the link on the right.