What is a Credit Score?

Have you ever tried to get an auto loan and been disapproved? Or maybe you're trying to obtain a mortgage and you're having difficult doing so. Many of these scenarios involve a credit score. However, there are still many people who either don't know what a credit score is or just simply don't care. Indeed, many people decide to pay straight cash for the things that they buy on a daily basis, including houses and real estate, and for them they actually don't need to worry about their credit score. However, one of the main reasons why virtually everyone should take a look at their credit score from time to time is because they'll have a higher chance of obtaining a credit line from a mortgage company, automobile company, or a bank.

Essentially, a credit score is exactly that: a score. It's a score that tells you how well you've paid your bills, what other credit cards you may have on file, as well as any other lines of credit that you've obtained over the years. All of these factors go into deciding what your credit score is. Once your credit score is determined then you will be given a number between 300 and 850. This number will tell you how well you have done with paying your bills and how well you have done with managing the credit that you've already obtained. If you have done a poor job at paying the bills then you probably will have a really low credit score. If you have tried to keep your credit score spotless then you probably have a score near 800 or close to 850. However, if you judge that you have done well, but have made a few mistakes then your score will fall anywhere between 300 and 850.

The overwhelming majority of the American public, though, does care about how well their credit score is and many people actually make a big deal over comparing their credit scores to other people's credit scores. Furthermore, the range of people in America who keep their credit score to the maximum score possible and those who simply don't care enough to keep their score up varies widely. For example, Fair Isaac has reported that those Americans whose scores are below 499 are just 2% of the population. However, just 13% of the American population has a score that's over 800 and the vast majority of the population tends to have credit scores anywhere between 750 and 800.

Another principle that you should know about credit scores is how the score is actually created. As mentioned, part of what goes into your credit score is how well you pay your bills and creditors each month. That accounts for the majority of the credit score. But other factors that go into your credit score is whether you've declared bankruptcy or not, how many legal judgments you have on your record, how many new credit lines you've applied to, along with how long you have actually had credit lines in your name. All of these formulas come together so that you can have a number between 300 and 850.

Altogether, a credit score is a very important number that you should know no matter how old you are. Your credit score can negatively affect your spouse's score and vice versa, but credit scores are also very important for obtaining loans, mortgages, and other lines of credit. If you don't keep and maintain your credit score then you will definitely be losing out!