If you’ve ever applied for a credit card, a mortgage, or tried to purchase a car, you probably already know about your credit report and its effect on how much money you can borrow, as well as what your interest rate will be.  What you might not know is that each person’s credit report is associated with a numerical score, which is commonly called a FICO score.  Your credit score can range from as low as 300 to as high as 800+.  The higher your overall score, the better the rating, which opens up opportunities for more credit and better terms such as lower interest rates.

People with lower credit scores, usually those with a score of 500 or lower, tend to have a more difficult time obtaining credit.  The lower end of the spectrum typically goes from 500-559.  Those with scores in this range might find it difficult to get a credit card or loan, and are often declined credit.  In some cases, they may be granted credit, but the terms are usually less than ideal which can often lead to more problems later on.  The lower to middle range is usually around 560-699.  People within this range may be able to get credit, but it could be under strict terms and higher rates.  It is also important to note that many employers now look at credit scores as a prerequisite for hiring, so you want to make sure yours is in the higher range.

Those who have higher credit scores often find it much easier to get loans, credit cards, mortgages, and to get better interest rates overall.  This higher FICO score range is from 700-850, and anyone within this range is considered to have good or excellent credit.  There are a number of different factors taken into account when calculating credit scores.  Usually this consists of things like how long you’ve had credit, how much open credit you have in terms of available credit, the balance on all of your current accounts, your monthly minimum payments, as well as any accounts that might have been paid late, are late currently, or are in collections.

If you happen to have a lower score, it is possible to improve these scores.  Sometimes, simply moving some debt around so that your ratios of open credit to account balances are low will do the trick.  Be sure to find out exactly why you have a lower credit score, so you know what to do to improve it.  Keep in mind that this can take some time since a lot of dings or problems on your credit report can take a while to be removed.  In the meantime, there are a lot of things you can do to get your credit score in the higher range.  Find out what you can do to take proactive steps in improving your credit score, so that you can get the credit you deserve.  In time, you will see the score improve and the opportunity to get lower interest rates and more credit should become available.