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9.2 Credit Cards: A Tool, Not a Crutch

What Is Your Credit Score, and How Do You Get It?

Your credit score tells potential creditors your level
of creditworthiness. When you have an excellent
credit score, lenders consider you to be financially
reliable and will offer you better (lower) interest
rates on loans. As you now know, interest rates can
have a major impact on your financial future. So it
is vitally important to track your credit score and
work toward achieving an excellent rating.

There are four main competing credit bureaus
(Equifax, Experian, TransUnion, and Innovis), each
of which gathers information from credit issuers
and public records. (An alternate credit bureau is
described in A Closer Look: Build Credit by Paying
Your Bills.) Equifax, Experian, and TransUnion cre- gpointstudio/iStock/Thinkstock
ated VantageScore 3.0, which is the most used A good credit score is important
mathematical model to measure a consumer’s cred- because it can help you take out a loan
itworthiness. VantageScore 3.0 calculates consumer and receive offers with lower interest
credit scores from 300 to 850. Here’s a range of rates. Keep track of your credit score
scores to help you get an indication of where you and always strive for the best rating.

stand:

• Excellent credit: 750–850
• Good credit: 661–749
• Fair credit: 601–660
• Poor credit: 501–600
• Bad credit: below 500

Most lenders view a score of 750 or above as an excellent credit score, but what is considered
excellent depends on who is extending the credit. One lender might view a credit score of 750
or above as a top score, whereas another might view 780 or above as excellent. There are no
hard-and-fast rules, only indicators based on creditor behavior over time.

Some credit card companies now include your credit score on your monthly bill. If not, you can
get your free credit score from Credit Karma, Credit.com, and Quizzle. The components that
make up your VantageScore 3.0 credit score (in order of importance) include the following:

• Payment history
• Age and type of credit
• Percentage of credit line used
• Total balance or debt
• Recent credit behavior and inquiries
• Available credit

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