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How To Repair Your Credit

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  1. Welcome
  2. The History of Credit
  3. Credit 101
    Understanding Your Credit
  4. Why Is Credit Important?
    1 Quiz
  5. What Is A Credit Score?
    1 Quiz
  6. FICO vs Vantage Scores
    1 Quiz
  7. What Is A Credit Bureau?
    1 Quiz
  8. What Is A Credit Report?
    1 Quiz
  9. What Is Credit Monitoring?
    1 Quiz
  10. Statute of Limitations
    1 Quiz
  11. Getting Started Repairing Your Credit
    Derogatory Marks
  12. Getting Started
  13. Your Consumer Rights and Protection
    6 Topics
    1 Quiz
  14. Obtaining Your Credit Reports
  15. Disputing Negative Accounts On Your Credit
    How To Read Your Credit Reports
  16. Disputing Negative Marks
  17. Credit Repair Mistakes To Avoid
  18. Getting Organized
  19. How To Track Your Results
  20. Analyzing Your Credit Reports For Errors
  21. How To Write A Dispute Letter
    1 Quiz
  22. Mailing Your Disputes
  23. How Disputes are Handled
  24. How to Dispute Collections
    1 Topic
  25. How to Dispute Late Payments
    1 Quiz
  26. How to Dispute Inquiries
    1 Quiz
  27. How To Dispute Charge-offs
  28. How To Dispute Bankruptcy
  29. Student Loan Relief
  30. Identity Theft Relief
  31. Negotiating with Creditors
    1 Quiz
  32. Re-Establishing Good Credit
    Adding Explanatory Statements
  33. How To Build Perfect Credit Scores
  34. How Creditors Evaluate Your Creditworthiness
    1 Quiz
  35. Choosing the Right Credit Card
  36. How To Apply For a Credit Card
  37. Credit Builder Loans
  38. Credit Management
    Becoming An Authorized User
  39. Managing Your Credit
  40. Improving Your Credit Opportunities
  41. How to track your results
  42. How To Remove A Dispute Remark
  43. How to Protect your SSN
    1 Quiz
  44. Toolbox
    Tool Box
Lesson 5 of 44
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What Is A Credit Score?

⌛ Video Length — 00:10:36

Lesson Summary

A credit score is a number that depicts a consumer’s creditworthiness. The higher the score, the better a borrower looks to potential lenders.

A credit score is based on credit history, the number of open accounts, total amounts of debt, and repayment history.

Lenders use credit scores to evaluate the probability that an individual will repay loans on… or late.

There a different types of credit scores and how they are calculated. But, one thing is for certain- it’s impossible to get ahead with low scores.

How Credit Scores Work

A credit score can significantly affect your financial life. It plays a key role in a lender’s decision to offer you credit. Your credit scores are divided into categories form poor-excellent. Let’s take a look closer.

  • Excellent: 800 to 850
  • Very Good: 740 to 799
  • Good: 670 to 739
  • Fair: 580 to 669
  • Poor: 300 to 580

Credit scoring categories

  • Payment history- 35%
  • Debt owed- 30%
  • Length of credit history (15%)
  • Credit mix (10%)
  • New credit (10%)


The cost of low credit scores

There’s a huge cost for having poor credit.

People with credit scores below 640, for example, are generally considered to be subprime borrowers. Lending institutions often charge interest on subprime loan at a rate higher than a prime borrower in order to compensate themselves for carrying more risk. They may also require a shorter repayment term or a co-signer for borrowers with a low credit score.

Conversely, a credit score of 700 or above is generally considered good and may result in a borrower receiving a lower interest rate, which results in their paying less money in interest over the life of the loan. 

Take this for example.

With that in mind, you should know… There are two main credit scoring models banks use to determine your creditworthiness.

Let’s take a look at them to give you a deeper understanding.