Credit Scoring

What Is A Credit Rating Scale?

Your credit report is devised from a few mathematical numbers, called a credit rating scale. This scale is compiled with a few different factors that come together to form that magical number that can either help you out in times of need or cost you hundreds extra in high interest rate.

This credit rating scale was designed to measure credit risk, basically to determine if you are creditworthy. These credit scores generally range from three hundred, being the worst score, and to eight hundred and fifty, being the best score.

Most of your score will come from your payment history. Do you make your payments on time every single month or do you have a lot of late payments. These will play a huge part in determining your credit score. Lenders don't want to take a risk in lending money to a person that is always late on their bills. You do not ever want to be 30 days late on your payments, and you certainly do not want to be 90 days late this will with out a doubt lower your credit score.

There are many other things that play part in rating your credit. Such as, how much debt you have. Are your credit cards at their maximum limit or are your balances low? Having high balances on your credit cards will lower your score. But if you have balances that are low it will help you to maintain a high credit score. This is because your payments will be at a manageable level, this is all determined by your monthly income. If your income is well above what your payments are for each month than you are in good standings.

If you apply for too much credit then there will be a lot of inquiries on your report and this too will lower your score. You should generally on apply for credit that you need. There is no need to have a ton of credit cards on hand.

Understanding how the credit rating scale works will help you to get and maintain a good credit score. Having a good score will save you tons of money because you will be able to get lower interest rates.