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Thursday, September 20, 2018

Credit Issues

When we talk about a credit score, the general principle is this: higher is better.  But what does a credit score actually mean?

The three main credit bureaus each have their own scoring models and ranges

  • Experian (formerly TRW) has a range of 300-800
  • Trans Union has a range of 300-850
  • Equifax has a range of 350-800

The factors that influence the score the most are:

  1. Paying bills on time
  2. Low Balance to Limit on credit cards
  3. No collections or tax liens (or other public record court related problems)
  4. Not a large number of inquiries in the last 4 months

Since everyone has a feel about school grading; and everyone has intuitive understanding about what a certain amount of money in the bank means, the chart below puts a credit score into two perspectives:

  1. Grade
  2. Net Worth

By no means, obviously, does it mean that your score equates to the amount of net worth shown and there is no scientific data to back up this analogy.  It is merely my attempt to put this issue into perspective for you.

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