How to Interpret Credit Scores

Your credit score allows potential creditors to gauge the likelihood of whether you will pay back debt. If your score is low, the risk is high, so you will more than likely be denied for credit. But if your score is fair to high, the risk may be worth it. Your credit score does not have to be a mystery; everyday consumers can interpret their scores.

Instructions

1

Understand how your credit score is calculated. Five different categories are examined at varying percentages to calculate your credit score. Your payment history on anything that involved credit and the amount you still owe are factored in at 35 percent and 30 percent, respectively. How long you have had credit is calculated at 15 percent while the amount of new credit that you have recently applied for plus the types of credit are factored in at 10 percent each.

2

Request your score. Visit annualcreditreport.com, where you can receive a free credit report from each of the three credit bureaus once a year. You will have to pay for your credit score to accompany the credit reports. Some creditors report to certain bureaus and not others, so your credit score could be different on each report.

3

Look at your score from each of the credit bureaus.

4

Assess the meaning attributed to your scores. There is no official chart that exists that will tell you exactly what each score translates to, but companies, banks and the credit bureaus go by ranges to say whether you have poor, average, good or excellent credit. A score of 300 to 500 is considered bad while 500 to 600 is better, but still poor. Between 600 and 700 is average, and as it approaches 700, it is getting closer and closer to good. Good is defined as 700 to 800 while 800+ is excellent.