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Anatomy of Good vs. Bad Credit

A Deeper Look At Credit Scores

Most people use credit in one form or another. Some credit is used to make large purchases, such as cars, homes and businesses, while other credit, typically revolving debt and unsecured loans, is used from day to day purchases and necessities. Every purchase made, and how the debt is paid, can affect a person's credit score.

usage of fico score

Don't Pick at Your Fico

Your credit score, or FICO score, is based on a number of factors. These include payment history, recent credit inquires, types of credit uses, length of credit history and how credit is used. For example, a person who is applying for his or her first credit card is likely to have a low credit score, simply because he or she has no credit history.

The three credit bureaus all use the FICO score to determine an individual's credit rating. These bureaus, Experian, Equifax and Transunion, keep detailed records on over 200 million people.

checking your score

Turn Your Head and Check Your Credit Score

The national average credit score is around 690. Residents of New England states are above average at around 713 while people in the South West have the lowest average at 673. That said, nearly 30% of Americans with credit have never checked their credit score. This is unfortunate, since 79% of all credit reports have errors.


What Credit Scores Mean

In a nutshell, the better credit score a consumer has, the better interest rate they are likely to qualify for. And the lower the interest rate on a line of credit, the less money will be spent on the purchase. Mortgage payments, car loans, even credit card payments will be less when the credit score is higher.


Tales of Good and Bad Credit Use

Chances are, you probably know people like those in the following story. Your credit score, excluding errors and exceptional circumstances, reflects spending habits relatively accurately. It's actually simple. Good savings and spending habits lead to a good credit score.

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